UNIVERSITY 

OF  CALIFORNIA 

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SCHOOL  OF  LAW 
LIBRARY 


LAW 


OF 


OILflm/NATURALGAS 


A  HAND  BOOK 

OF 

THE  STATUTES  OF  TEXAS  AND  THE  DECISIONS  OF 

ITS  COURTS  RELATING  TO  OIL  AND  NATURAL 

GAS,  THE  ORGANIZATION  AND  OPERATION 

OF  OIL  AND  GAS  COMPANIES,  AND  THE 

OWNERSHIP    AND    TRANSFER    OF 

MINERAL  RIGHTS. 


A.  E.  WILKINSON,  Reporter  to  Supreme  Court 
and].  A.   RICHARDSON,  of  the. Austin  Bar. 


L.   STCC.K,  AUST 

1915 


v 

1915 


COPYRIGHT,   1915,    BY 
A.  E.  WILKINSON  AND  J.  A.  RICHARDSON. 


PREFACE. 

The  recent  development  of  extensive  oil  and  gas  fields 
in  Texas  and  the  activity  displayed  in  their  exploration 
and  mining  operations  therein  are  thought  to  justify  this 
effort  to  present,  in  brief  and  convenient  form,  the  stat- 
utes of  this  State  and  the  rulings  of  its  courts  bearing 
on  the  subject. 

We  have  included  so  much  of  the  General  Corporation 
Laws  as  have  any  application,  the  statutes  relating  to 
mines  and  mining,  those  regulating  oil  and  gas  wells,  the 
act  governing  issuance  and  sales  of  corporate  stock,  com- 
monly known  as  the  Blue  Sky  Law,  and  a  concise  sum- 
mary of  the  rulings  of  the  appellate  courts  of  the  State 
on  mineral  rights  in  land,  their  ownership  acquisition 
and  transfer. 

Large  sums  of  money  are  being  invested  in  these  in- 
terests by  men  who  have  had  little  opportunity  to  learn 
the  law  governing  the  rights  and  contracts  with  which 
they  are  dealing.  Lawyers  called  upon  to  advise  them 
sometimes  find  themselves  entering  upon  a  new  field,  and 
compelled  to  search  through  many  volumes  of  statutes 
and  reports  for  an  answer  to  the  questions  asked  them. 
Even  those  who  have  made  special  study  of  the  subject 
may  welcome  a  manual  like  the  present,  which  brings 
into  brief  compass  the  information  required. 

We  have  sought  to  bring  this  presentation  of  the  sub- 
ject up  to  date,  by  including  important  statutes  enacted 
by  the  present  Legislature  (the  34th)  and  recent  decisions 
of  the  appellate  courts  accessible  to  the  profession  only 
through  advance  sheets  of  the  volumes  in  which  they  are 
to  appear.  Questions  of  great  interest  are  involved  in 
some  of  these  rulings  and  in  cases  pending  and  not  yet 
determined,  to  which  attention  is  called. 

We  have  added  forms  for  the  creation  of  corporations 
and  for  the  sale  or  lease  of  mining  rights  in  oil  and  nat- 
ural gas,  such,  as  have  been  approved  or  are  in  com- 
mon use. 

A.  E.  WILKINSON, 
J.    A.    RICHARDSON. 


CONTENTS. 

PAGE. 

CORPORATION  LAWS  OF  TEXAS 7-53 

MINING  LAWS  OF  TEXAS 54-64 

FRANCHISE   TAX       64-67 

OIL  AND  GAS  WELLS 67-71 

BLUE  SKY  LAW  AND  ATTORNEY  GENERAL'S  OPINION  72-108 

MINERALS  AND  MINING  RIGHTS 109-135 

What  are  minerals 109 

Ownership      .      .      . 109-110 

Tenants  in  common Ill 

Tenants  for  years Ill 

Ways  and  easements 111-112 

Rivers  and  tidal  waters 112-113 

Separation  from  title  to  soil 113-114 

Conditional  contracts  and  leases      ....  114-120 

Options  and  unilateral  contracts      ....  120-122 

Contracts  for  operation 122-123 

Public  Lands 123-124 

Employer's    liability        124 

Taxation,  state  and  federal 125-135 


CORPORATION  LAWS  OF  TEXAS. 

(From  Constitution,  Revised  Statutes,  1911,  and  later 
Acts.  Only  such  laws  as  relate  to  the  subject  of  oil  and 
gas  companies  are  included.) 


CONSTITUTION  OF  TEXAS,  ART.  12. 

Section  1.  No  private  corporation  shall  be  created  ex- 
cept by  general  laws. 

Section  2.  General  laws  shall  be  enacted  providing  for 
the  creation  of  private  corporations,  and  shall  therein 
provide  fully  for  the  adequate  protection  of  the  public 
and  of  the  individual  stockholders. 

Section  6.  No  corporation  shall  issue  stock  or  bonds 
except  for  money  paid,  labor  done,  or  property  actually 
received,  and  all  fictitious  increase  of  stock  or  indebted- 
ness shall  be  void. 

NOTE. — Certain  corporations  created  for  public  service,  though  char- 
tered as  private  corporations,  are  quasi-public  and  subject  to  regula- 
tion in  the  public  interest.  City  Water  Co.  vs.  State,  33  S.  W.,  259. 
Oil  and  gas  wells,  though  private  property,  are  subject  to  statutory 
regulations,  in  the  public  interest,  to  prevent  wasting  the  supply  in 
their  fields.  Ohio  Oil  Co.  vs.  Indiana,  177  U.  S.,  190. 


REVISED   STATUTES,  1911. 
Title  25. 

CORPORATIONS — PRIVATE. 


8  LAW  OF  OIL  AND  NATURAL  GAS 

CHAPTER  I. 

PRELIMINARY   PROVISIONS. 

Article  1117.  Corporations  Classified. — Corporations  are 
either  public  or  private.  (Act  of  April  23,  1874,  p.  120. 
P.  D.,  5932.  Acts  1873,  p.  42.) 

Article  1118.  Public  Corporations. — A  public  corpora- 
tion is  one  that  has  for  its  object  the  government  of  a 
portion  of  the  State.  (P.  D.,  5933.) 

Article  1119.  Private  Corporations. — Private  corpora- 
tions are  of  three  kinds :  First,  religious ;  second,  corpora- 
tions for  charity  or  benevolence;  and,  third,  corporations 
for  profit.  (R.  S.,  1879,  564.  P.  D.,  5934.) 

NOTE. — A  gas  company  is  a  private  corporation.  The  fact  that  it 
is  quasi-public,  being1  engaged  in  public  service,  does  not  prevent 
its  exercise  of  powers  conferred  on  all  private  corporations,  such 
as  to  borrow  money  and  to  mortgage  its  property  by  deed  of  trust. 
Pumphrey  vs.  Threadgill,  9  Texas  Civ.  App.,  184,  28  S.  W.  450.  But 
a  public  service  corporation  can  not  sell  or  mortgage  its  franchise 
as  a  corporation.  City  Water  Co.  vs.  State,  88  Texas,  602,  32  S.  W., 
1033.  And  it  may  be  dissolved  for  failure  to  perform  its  functions. 
Id.  A  corporation  is  a  "person,"  coming  within  the  equal  protection 
clause  of  the  fourteenth  amendment  to  the  constitution  of  U.  S.  State 
vs.  T.  &  P.  Ry.  Co.,  143  S.  W.,  223. 

CHAPTER  II. 

CREATION  OF  CORPORATIONS. 

Article  1120.  Private  Corporations  May  be  Created. — 
Private  corporations  may  be  created  by  the  voluntary  as- 
sociation of  three  or  more  persons  for  the  purposes  and 
in  the  manner  hereinafter  mentioned.  (Acts  1874,  p. 
120.  Acts  1897,  p.  188;  P.  D.,  5935.) 

NOTE. — The  Secretary  of  State  may  refuse  to  file  a  charter  expressing 
a  purpose  not  authorized  by  the  statute.  Miller  vs.  Tod,  95  Texas, 
404,  67  S.  W.,  483 ;  Ramsey  vs.  Tod,  95  Texas,  614,  93  Am.  St.,  875 ,  69 


LAW  OF  OIL  AND  NATURAL  GAS  9 

S.  W.,  133 ;  American  Salt  Co  vs.  Heidenheimer,  80  Texas,  344,  15  S.  W., 
1038.  His  rulings  and  those  of  the  Attorney  General  on  these  ques- 
tions are  not  judicial  determinations,  but  may  be  persuasive  on  the 
courts  in  case  of  doubt.  Fire  Ass'n.  vs.  Love,  101  Texas,  381,  108  S.  W., 
158 ;  Houston  &  T.  C.  E.  B.  Co.  vs.  State,  95  Texas,  507,  68  S.  W.,  777 ; 
Galveston,  H,  &  S.  A.  Ey.  Co.  vs.  State,  81  Texas,  572,  17  S.  W.,  67; 
State  vs.  Gunter,  36  Texas  Civ.  App.,  381,  81  S.  W.,  1028. 

Corporations  can  not  be  formed  for  two  purposes  expressed  in 
distinct  paragraphs  of  the  statute  (Article  1121)  except  as  specially 
authorized  by  paragraphs  72,  73,  Article  1121  post.  G.  C.  &  S.  F.  Ey. 
Co.  vs.  Morris,  67  Texas,  692,  4  S.  W.,  156 ;  Eamsey  vs.  Tod,  95  Texas, 
614,  69  S.  W.,  133;  Borden  vs.  Tres  Palacios  Eice  Co.,  82  S.  W.,  463. 
A  body  not  legally  organized,  but  acting  under  color  of  law,  may  be 
a  de  facto  corporation.  American  Salt  Co.  vs.  Heidenheimer,  80 
Texas,  344,  15  S.  W.,  1038.  And  its  existence  not  to  be  questioned 
collaterally.  Conley  vs.  Daughters  of  Eepublic,  151  S.  W.,  883.  But 
only  where  there  has  been  an  effort  to  comply  and  the  defects  are 
merely  formal.  Allen  vs.  Long,  80  Texas,  261,  16  S.  W.,  43.  Such 
as  failure  to  elect  directors.  Conley  vs  Daughters  of  Eepublic,  supra. 

Article  1121.  For  What  Purposes  Corporations  May 
be  Created. — The  purposes  for  which  private  corporations 
may  be  formed  are: 

13.  The  manufacture  and  supply  of  gas,  and  the  sup- 
ply of  light,  heat,  and  electric  motor  power,  or  either  of 
them,  to  the  public  by  any  means. 

16.  For  the  establishment  and  maintenance  of  oil  com- 
panies, with  the  authority  to  contract  for  the  lease  and 
purchase  of  the  right  to  prospect  for,  develop  and  use, 
coal  and  other  minerals,  petroleum,  and  gas;  also,  the 
right  to  erect,  build  and  own,  all  necessary  oil  tanks,  cars, 
and  pipes,  necessary  for  the  operation  of  the  business  of 
the  same.  (Act  of  March  31,  1915,  Laws,  34th  Leg., 
p.  225.) 

NOTE. — Paragraph  16,  of  Article  1121,  is  here  given  as  amended  by 
Act  of  March  31,  1915.  The  paragraph  as  it  stood  in  the  Eevised 
Statutes  of  1911  was  as  follows : 

"16.  For  the  establishment  and  maintenance  of  oil  companies, 
with  authority  to  contract  for  the  lease  and  purchase  of  the  right 
to'  prospect  for,  develop,  and  use,  coal  and  other  minerals,  and  pe- 
troleum ;  also,  the  right  to  erect,  build,  and  own,  all  necessary  oil 
tanks  cars,  and  pipes,  necessary  for  the  operation  of  the  business  of 
the  same.  (Acts,  1897,  p.  188)." 


10  LAW  OF  OIL  AND  NATURAL  GAS 

The  Act.  of  101. >  is  printed  in  full,  following1  this  note.  The  second 
section  of  the  Act  confers  the  same  powers  on  corporations  heretofore 
created  under  paragraph  16.  The  amendment  was  obviously  designed 
to  remove  any  doubt  as  to  the  powers  of  such  companies  to  operate 
for  the  production  of  natural  g.is,  which  was  not  specifically  enumer- 
ated among  the  minerals  to  be  mined.  It  would  seem,  however, 
that  a  fair  construction  of  this  paragraph,  as  it  stood  before  the 
amendment,  would  include  natural  gas  under  the  "other  minerals" 
mentioned.  Even  a  strict  application  of  the  rule  of  construction  which 
would  limit  such  general  language  to  like  minerals  to  those  specially 
enumerated  would  reach  this  result.  Those  mentioned  are  such  as 
are  useful  for  the  production  of  light  and  heat.  Petroleum  and 
natural  g;is  are  commonly  found  in  the  same  general  field  of  ex- 
ploration. They  are  produced  by  the  same  method  of  mining, — that 
is,  by  bored  wells.  And  the  prospector  would  generally  be  unable  to 
determine  which  he  might  strike. 

This  paragraph  gives  only  the  authority  to  contract  for  the  lease 
and  purchase  of  the  right  to  prospect  for,  develop,  and  use  the  minerals 
mentioned  ;  but  the  right  to  purchase  and  hold  real  estate  otherwise 
than  by  lease  or  contract  for  prospecting  and  mining,  so  far  as 
appropriate  to  the  corporate  business,  is  conferred  on  all  private  cor- 
porations. Art.  1140,  par.  4,  and  note,  Art.  1175  and  note.  Under 
these,  it  seemfe  such  corporations  would  have  the  power  to  purchase 
and  hold  in  fee  the  land  necessary  for  their  operations,  as  well  as 
to  lease  or  to  buy  merely  the  mineral  rights. 

For  form  of  a  purpose  clause  of  a  corporation  created  under  this 
paragraph,  see  Form  II,  post. 


GENERAL  LAWS,  34TH  LEG.,  P.  225. 
[S.  B.  No.  282.]  CHAPTER  144. 

An  Act  to  amend  Title  25,  Chapter  2,  Article  1121,  Subdivision  16,  Re- 
vised Statutes  of  Texas,  1911,  providing  for  the  creation  of  private 
corporations  for  the  establishment  and  maintenance  of  oil  companies 
with  authority  to  contract  for,  lease  and  purchase ;  of  the  right  to 
prospect  for,  develop  and  use  coal  and  other  minerals,  by  adding 
thereto  the  right  to  contract  for  the  lease  and  purchase,  of  the  right 
to  prospect  for,  develop  and  ut-e  gas ;  and  declaring  an  emergency. 

Be  it  enacted  by  the  Legislature  of  the  State  of  Texas: 

SECTION  1.    That  Article  1121,  Subdivision  16,  of  Title 
25,  Chapter  2,  of  the  Revised  Statutes  of  the  State  of 


LAW  OF  OIL  AND  NATURAL  GAS  11 

Texas,  1911,  be  amended  so  as  to  hereafter  read  as  fol- 
lows: 

"For  the  establishment  and  maintenance  of  oil  com- 
panies with  the  authority  to  contract  for  the  lease  and 
purchase  of  the  right  to  prospect  for,  develop  and  use  coal 
and  other  minerals,  petroleum  and  gas;  also  the  right  to 
erect,  build  and  own  all  necessary  oil  tanks,  cars  and  pipes 
necessary  for  the  operation  of  the  business  of  same." 

SEC.  2.  All  private  corporations  heretofore  created  un- 
der the  provisions  of  Subdivision  16,  Article  1121,  Chap- 
ter 2,  Title  25,  Revised  Statutes  of  Texas  of  1911,  shall, 
in  addition  to  the  powers  therein  enumerated,  have  the 
power  to  contract  for  the  lease  and  purchase  of  the  right 
to  prospect  for,  develop  and  use  gas;  also  erect,  build  and 
own  all  necessary  oil  tanks,  cars  and  pipes  necessary  for 
the  operation  of  the  business  of  same. 

SEC.  3.  The  fact  that  there  is  no  authority  for  the 
creation  of  corporations  to  contract  for  the  lease  and  pur- 
chase of  right  to  prospect  for,  develop  and  use  gas  cre- 
ates an  emergency  and  an  imperative  public  necessity  that 
the  constitutional  rule  requiring  that  bills  be  read  on  three 
several  days  be  suspended,  and  said  rule  is  hereby  sus- 
pended and  that  this  Act  take  effect  and  be  in  force  from 
and  after  its  passage,  and  it  is  so  enacted. 

NOTE. — S.  B.  No.  282  passed  the  Senate  M#rch  19,  no  vote  given. 
Passed  the  House  March  19,  no  vote  given. 

Approved  March  31,  1915. 

Takes  effect  90  days  after  adjournment. 

(Article  1121,  Rev.  Stats.,  1911,  continued.) 

39.  For  the  purpose  of  doing  business  in  any  State  or 
foreign  country: 

(a)  The  establishment  of  land  companies  to  buy,  own, 
sell  and  convey  real  estate  and  minerals,  and  engage  in 
mining,  agriculture  and  stock  raising. 

(c)  The  acquisition,  construction,  maintenance,  oper- 
ating and  owning  of  power  and  illuminating  plants  and 
systems  of  every  character. 


12  LAW  OF  OIL  AND  NATURAL  GAS 

72.  Private  Corporations  may  be  created  for,  or  after 
being  created,  may  be  so  amended  as  to  include  two  or 
more  of  the  following  purposes,  namely:     The  construc- 
tion or  purchase  and  maintenance  of  mills  and  gins;  the 
manufacture  and  supply  to  the  public,  by  any  means,  of 
ice,  gas,  light,  heat,  water  and  electric  motor  power,  or 
either,  in  connection  with  such  mills  and  gins,  or  either, 
the  harvesting  of  grain  or  the  harvesting  and  threshing 
of  grain;  provided,  that  the  authorized  capital  stock  of  all 
corporations,  authorized  by  this  subdivision  shall  not  ex- 
ceed two  hundred  and  fifty  thousand  dollars.     (Acts  1903, 
p.  227.) 

73.  Private  corporations  may  be  created  for,  or  after 
being  created  may  so  amend  their  charters  so  as  to  in- 
clude two   or  more   of  the   following   purposes,   namely: 
The  supply  of  water  to  the  public  for  irrigation,  power, 
municipal  or  domestic  purposes;  the  manufacture  of  and 
supply  of  ice  to  the  public ;  the  generation  of  and  supply 
of  gas,  electric  light  and  motor  power  to  the  public;  the 
manufacture,  supply  and  sale  of  carbonated  water  to  the 
public;  the  operation  of  cottonseed  oil  mills  and  the  oper- 
ation of  cotton  compresses.     Provided,  that  corporations 
including  more  than  one  of  the  purposes  named  in  this 
article  shall  pay  the  franchise  tax  provided  by  law  for 
each  of  the  purposes  so  included  in  their  said  charters 
or  amendments  thereto;   and   provided   further  that   the 
authorized  capital  stock  of  corporations  created  under  or 
authorized  by  this  article  which  shall  include  irrigation 
and  any  one  or  more  of  the  other  purposes  named  in  this 
article,  shall  not  exceed  $1,000,000;  and  that  the  author- 
ized capital  stock  of  corporations  created  under  or  au- 
thorized by  this  article  which  shall  include  waterworks, 
for  the  supply  of  water  to  the  public  or  municipalities, 
and  any  one  or  more  of  the  other  purposes  named  in  this 
article  except  irrigation,  shall  not  exceed  $500,000,  and 
that  the  authorized  capital  stock  of  corporation  so  author- 
ized by  this  article  for  any  two  or  more  of  the  purposes 
named  in  this  article  except  irrigation  and  waterworks 


LAW  OF  OIL  AND  NATURAL  GAS  13 

or  the  supply  of  water  to  the  public,   shall   not  exceed 
$200,000.     (Acts  33rd  Leg.,  p.  352.) 

NOTE. — The  foregoing  enumeration  of  the  purposes  for  which  cor- 
porations may  be  chartered  contains  no  provision  suitable  for  the 
organization  of  a  natural  gas  company  with  power  at  once  to  produce 
such  gas  from  wells,  to  transport  it  to  points  where  it  may  find  a 
market,  and  there  sell  it  to  consumers.  A  gas  company  created  under 
paragraph  13,  ante,  if  the  right  to  "manufacture  and  supply"  were 
held  to  cover  the  production  of  natural  gas  from  wells,  would  be 
without  the  power  to  exercise  eminent  domain  or  construct  pipe 
lines  from  the  wells  to  towns  where  there  might  be  a  demand  for  its 
consumption.  An  oil  company  organized  under  paragraph  16,  ante, 
would  have  the  right,  under  the  amendment  of  March  13,  1915,  "to 
prospect  for,  develop  and  use  coal  and  other  minerals,  petroleum  and 
gas."  It  had,  in  the  opinion  of  the  writers,  siich  power  even  before 
the  amendment.  But  it  would  have  no  power  to  construct  pipe 
lines  for  its  transportation  to  market.  A  pipe  line  company  organ- 
ized under  Articles  1303-1308,  post,  would  be  authorized  only  to  "store, 
transport,  buy  and  sell,"  and  would  be  a  common  carrier  obliged  to 
transport  for  all  without  discrimination  (Art.  1308).  If  it  is  desired 
to  organize  a  natural  gas  company  to  produce  such  article  from  its 
wells,  lay  pipe  lines  for  its  transportation  to  such  towns  as  can  be 
reached  by  that  means,  and  then  sell  to  consumers,  it  should  be  char- 
tered under  the  Act  of  March  25,  1911,  Laws,  32d  Leg.,  ch.  Ill,  p.  228, 
which  is  held  by  the  Attorney  General's  department  to  authorize  the 
creation  of  a  company  with  such  powers.  See  that  Act,  post,  p.  45, 
and  note  thereto. 

Article  1122.  Charter  and  What  it  Must  Set  Forth. — A 
charter  must  be  prepared  setting  forth: 

1.  The  name  of  the  corporation. 

2.  The  purpose  for  which  it  is  formed. 

3.  The  place   or   places   where   its   business   is   to   be 
transacted. 

4.  The  term  for  which  it  is  to  exist. 

5.  The  number  of  its  directors  or  trustees,   and  the 
names  and  residences  of  those  who  are  appointees  for  the 
first  year. 

6.  The  amount  of  its  capital  stock,  if  any,  and  the  num- 
ber of  shares  into  which  it  is  divided. 

7.  The   charter  of  a  bridge  or  ferry   company   shall 


14  LAW  OF  OIL  AND  NATURAL  GAS 

also  state  the  stream  intended  to  be  crossed  by  the  bridge 
or  ferry. 

8.  The  charter  of  a  road  company  shall  also  state: 
First,  the  kind  of  a  road  intended  to  be  constructed; 
second,  the  places  from  and  to  which  the  road  is  intended 
to  be  run ;  third,  the  counties  through  which  it  is  intended 
to  be  run;  fourth,  the  estimated  length  of  the  road. 
(P.  D.,  5937.) 

NOTE. — For  approved  form  of  charters  under  this  article,  see  post, 
Form  I.  Some  preliminary  organization  is  assumed  in  the  statute, 
since  directors  must  be  designated  and  stock  subscribed.  Articles  1122. 
1125,  1127,  post;  Smith  vs.  First  Nat.  Bank,  43  Texas  Civ.  App.,  495,  95 
S.  W.  1116.  This  subject  of  sale  of  stock  before  chartering,  and  how 
expenses  of  promotion  and  organization  are  to  be  met  is  now  strictly 
regulated  by  the  Act  of  August  31,  1913  (The  Blue  Sky  Law),  post,  pp. 
72-81. 

Article  1123.  Charter  Must  be  Subscribed  and  Ac- 
knowledged.— The  charter  of  an  intended  corporation 
must  be  subscribed  by  three  or  more  persons;  two  of 
whom  at  least  must  be  citizens  of  this  State,  and  must  be 
acknowledged  by  them  before  an  officer  duly  authorized 
to  take  acknowledgment  of  deeds ;  provided,  that  all  char- 
ters for  the  purposes  named  in  clauses  two  and  three  of 
Article  1121  of  this  chapter  and  title  may  be  subscribed 
by  married  women,  who  may  also  be  stockholders,  officers 
and  directors  thereof;  and  their  acts,  contracts  and  deeds 
shall  be  as  binding  and  effective  for  all  purposes  of  said 
corporation  as  if  they  were  males;  and  the  joinder  and 
consent  of  their  husbands  and  privy  examinations  separate 
and  apart  from  them  shall  not  be  required.  (Acts  1887, 
p.  103.) 

NOTE. — The  statute  does  not  require  that  the  citizenship  of  all  the 
corporators  appear  on  the  face  of  the  instrument,  nor  provide  how  it 
is  to  determined ;  but  the  Secretary  of  State  has  authority  to  inquire 
into  the  fact.  If  none  of  them  were  citizens  the  approval  of  the  char- 
ter by  the  Secretary  created  them  a  de  facto  corporation.  The  State 
could  forfeit  the  charter  because  illegally  obtained,  but  the  corporators 
were  not  liable  as  partners  to  persons  dealing  \vith  them.  American 
Salt  Co.  vs.  Heidenheimer,  80  Texas,  344,  15  S.  W.,  1038. 


LAW  OF  OIL  AND  NATURAL  GAS  15 

Article  1124.  Business  Firm  Shall  Give  Notice  of  In- 
tention to  Incorporate. — Whenever  any  banking,  mercan- 
tile or  other  business  firm  desires  to  become  incorporated 
without  a  change  of  the  firm  name,  such  firm  shall,  in 
addition  to  the  notice  of  dissolution  required  at  common 
law,  give  notice  of  such  intention  to  become  incorporated, 
for  at  least  four  successive  weeks,  in  some  newspaper 
published  at  the  seat  of  State  government,  and  in  the 
county  in  which  such  firm  has  its  principal  business  office, 
if  there  be  a  newspaper  in  such  county,  and,  if  not,  then 
in  some  newspaper  published  in  some  adjoining  county; 
and  until  such  notice  shall  have  been  so  published  for  the 
full  period  above  named,  no  change  shall  take  place  in 
the  liability  of  such  firm  or  the  members  thereof. 

Article  1125.  Private  Corporations  for  Profit  Must 
Subscribe  Full  Amount  of  Stock  and  Pay  Fifty  per  cent 
of  Same,  Before  Being  Chartered. — The  stockholders  of 
all  private  corporations  created  for  profit  with  an  au- 
thorized capital  stock  under  the  provisions  of  this  chapter, 
shall  be  required,  in  good  faith,  to  subscribe  the  full 
amount  of  its  authorized  capital  stock,  and  to  pay  fifty 
per  cent  thereof  before  said  corporation  shall  be  chartered. 
(Acts  1901,  p.  18.  Acts  1897,  p.  192.  Acts  1907,  p.  309, 
Sec.  1.) 

Article  1126.  Secretary  of  State  to  Receive,  File  and 
Record  Charter,  on  Satisfactory  Evidence  of  Compliance, 
and  Payment  of  Fees  and  Franchise  Tax. — Whenever  the 
stockholders  of  any  such  company  shall  furnish  satisfac- 
tory evidence  to  the  Secretary  of  State  that  the  full 
amount  of  the  authorized  capital  stock  has  in  good  faith 
been  subscribed,  and  fifty  per  cent  thereof  paid  in  cash, 
or  its  equivalent  in  other  property  or  labor  done,  the 
product  of  which  shall  be  to  the  company  of  the  actual 
value  at  which  it  was  taken,  or  property  actually  received, 
it  shall  be  the  duty  of  said  officer,  on  payment  of  office 
fees  and  franchise  tax  due,  to  receive,  file  and  record  the 
charter  of  such  company  in  his  office,  and  to  give  his  cer- 
tificate showing  the  record  thereof.  (Id.) 

Article  1127.     Satisfactory  Evidence  Defined. — Satisfac- 


16  LAW  OF  OIL  AND  NATURAL  GAS 

tory  evidence  above  mentioned  shall  consist  of  the  affidavit 
of  those  who  executed  the  charter,  stating  therein: 

1.  The  name,  residence  and  postoffice  address  of  each 
subscriber  to  the  capital  stock  of  such  company. 

2.  The  amount  subscribed  by  each,   and  the  amount 
paid  by  each. 

3.  The  cash  value  of  any  property  received,  giving  its 
description,   location   and   from   whom  and   the  price   at 
which  it  was  received. 

4.  The  amount,  character  and  value  of  labor  done,  from 
whom,  and  price  at  which  it  was  received.     (Id.) 

Article  1128.  Secretary  of  State  May  Require  Other 
Evidence. — If  the  Secretary  of  State  is  not  satisfied,  he 
may,  at  the  expense  of  the  incorporators,  require  other 
and  more  satisfactory  evidence  before  he  shall  be  re- 
quired to  receive,  file  and  record  said  charter.  (Id.) 

NOTE. — For  approved  forms  of  the  affidavits  required  by  Articles 
1125-1128,  see  post.  Form  IV.  As  to  how  stock  is  to  be  paid  for, 
and  for  what  consideration  in  property  or  services  rendered  it  can  be 
issued,  see  Article  1146  and  note  thereunder. 

Article  1131.  Must  be  Filed  with  Secretary  of  State, 
Etc. — Such  charter  shall  thereupon  be  filed  in  the  office  of 
the  Secretary  of  State,  who  shall  record  the  same  at  length 
in  a  book  to  be  kept  for  that  purpose,  and  retain  the 
original  on  file  in  his  office.  A  copy  of  the  charter,  or  of 
the  record  thereof,  certified  under  the  great  seal  of  the 
State,  shall  be  evidence  of  the  creation  of  the  corporation. 
(Act  April  23,  1874,  Sec.  9.  P.  D.,  5940.) 

NOTE. — The  Secretary  of  State  may  be  compelled  by  mandamus  from 
the  Supreme  Court  to  file  a  charter  which  complies  with  the  law, 
where  he  refuses  so  to  do.  Miller  vs.  Tod,  95  Texas,  404,  67  S.  W., 
483  ;  Ramsey  vs.  Tod,  95  Texas,  614  ;  69  S.  W.,  133 ;  G.  C.  &  S.  F.  Ry.  Co. 
vs.  Morris,  67  Texas,  692,  4  S.  W.,  156. 

Article  1132.  Corporations  Shall  Exist  from  Time  of 
Filing  Charter,  Etc. — The  existence  of  the  corporation 
shall  date  from  the  filing  of  the  charter  in  the  office  of  the 
Secretary  of  State,  and  the  certificate  of  the  Secretary  of 


LAW  OF  OIL  AND  NATURAL  GAS  17 

State   shall   be   evidence   of   such   filing.      (Id.,    Sec.    10. 
P.  D.,  5941.) 

NOTE. — No  proceeding's  short  of  filing  the  charter  create  the  indi- 
viduals into  a  corporation.  Bank  of  De  Soto  vs.  Reed,  50  Texas  Civ. 
App.,  102,  109  S.  W.,  259.  But  after  it  is  filed  their  liability  for  the 
undertaking's  of  its  owners  and  managers  becomes  that  of  stockholders. 
Bank  vs  Texas  Inv.  Co.,  74  Texas,  421,  12  S.  W.,  101. 

Article  1133.  Charter  May  Be  Amended,  How. — Any 
private  corporation  heretofore  organized  or  incorporated,  or 
which  may  hereafter  be  organized  or  incorporated,  for  any 
of  the  purposes  mentioned  in  this  chapter  may  amend  or 
change  its  charter  or  act  of  incorporation  by  filing,  authen- 
ticated in  the  manner  required  by  this  chapter  as  to  an  orig- 
inal charter  of  incorporation,  such  amendments  or  changes 
with  the  Secretary  of  State;  and,  in  case  of  a  corporation, 
created  by  special  act  of  the  Legislature,  said  corporation 
shall  cause  the  amendments  or  changes  to  its  charter  to  be 
authenticated  as  required  in  the  case  of  an  original  charter 
of  incorporation,  and  filed  with  the  Secretary  of  State, 
together  with  the  original  charter  of  such  company,  and 
such  amendments  thereto,  or  changes  therein,  if  any,  as 
have  been  made  by  special  act  of  the  Legislature;  and  the 
same  shall  be  recorded  by  the  Secretary  of  the  State,  fol- 
lowed by  the  proposed  amendments  or  changes  thereof. 
(Id.,  Sec.  10.  P.  D.,  GOllb.) 

NOTE. — As  to  amendments  which  increase  capital  stock  see  note  to 
Article  1145  post. 

Article  1134.  When  Amendments  Shall  Take  Effect. — 
The  amendments  or  changes  provided  for  in  the  preceding 
articles  shall  take  effect  and  be  in  force,  from  the  date 
of  the  filing  thereof  with  the  Secretary  of  State;  and  the 
certificate  of  the  Secretary  of  State  shall  be  evidence  of 
such  filing.  (Id.) 

Article  1135.  Amendments,  What  Void  and  What  Valid. 
— No  amendment  or  change  violative  of  the  Constitution 
or  laws  of  this  State  or  any  of  the  provisions  of  this 


18  LAW  OF  OIL  AND  NATURAL  GAS 

title  shall  be  of  any  force  or  effect;  amendments  or 
changes  may  include  additional  purpose  for  which  private 
corporations  may  be  incorporated  to  that  contained  in 
its  original  or  amended  charter,  as  are  specified  in 
subdivision  72  of  Article  1121;  but  such  amendments 
which  so  change  the  original  purpose  of  such  corpora- 
tion as  to  prevent  the  execution  thereof  shall  be  of  no 
force  or  effect.  (Acts  1903,  p.  227.) 

Article  1137.  Renewal  and  Consolidation  of  Two  or 
More  Such  Corporations,  Etc.,  How. — Any  two  or  more 
of  such  corporations  may  revive  and  consolidate  their 
charters  under  a  new  corporate  name,  or  under  the  name 
of  either,  with  all  privileges,  immunities  and  rights  of 
property,  real  and  personal,  enjoyed  by  each  at  the  date 
of  the  expiration  of  their  several  charters,  by,  in  like 
manner,  filing  a  charter,  which  shall  recite  the  fact  of 
consolidation,  accompanied  by  certified  copies  of  said 
original  charters;  provided,  the  provision  thereof  shall 
not  be  construed  to  relieve  any  corporation  from  the 
payment  of  occupation  taxes,  now  or  hereafter  required 
by  law.  (Id.) 

NOTE. — Consent  of  stockholders  is  necessary  to  consolidation.  Clark 
vs.  Brown,  108  S.  W.,  421.  Purchase  by  one  corporation  of  the  property 
and  franchises  of  another  does  not  effect  a  consolidation.  Supreme 
R.  F.  M.  C.  vs.  Erickson,  131  S.  W.,  92.  Nor  show  identity  of  the  two 
concerns.  McLean  &  D.  vs.  Pressed  Brick  Co.,  128  S.  W.,  442.  Nor 
sxibject  the  purchaser  to  the  seller's  liability  to  an  injured  servant. 
Abilene  C.  Oil  Co.,  vs.  Anderson,  41  Texas  Civ.  App.,  342,  91  S.  W.,  607. 
As  to  consolidation  of  corporations  of  different  states  see :  "VWialey 
vs.  Bankers  Union,  39  Texas  Civ.  App.,  385,  88  S.  W.,  259;  Gordon  vs. 
American  P.  of  S.,  141  S.  W.,  331. 

Article  1138.  Existence  of  Corporation  Shall  not  be 
Disputed  Collaterally. — No  person  who  assumes  an  obliga- 
tion to  an  ostensible  corporation,  as  such,  shall  resist  the 
enforcement  of  such  obligation,  on  the  ground  that  there 
was  in  fact  no  such  corporation,  until  that  fact  shall 
have  been  adjudged  in  a  direct  proceeding  had  for  the 
purpose. 


LAW  OF  OIL  AND  NATURAL  GAS  19 

NOTE. — This  proceeding-  can  only  be  had  by  the  State.  Troutman 
vs.  McCleskey,  7  Texas  Civ  App.,  561,  27  S.  W.,  173 ;  Oriental  vs  Barclay, 
16  Texas  Civ.  App.,  193,  41  S.  W.,  117;  Oriental  Inv.  Co.  vs.  Sline, 
41  S.  W.,  130;  Conley  vs.  Daughters  of  Republic,  151  S.  W.,  877; 
Railway  Co.  vs.  Anderson  County,  150  S.  W.,  250 ;  Dillard  vs.  Lumber 
Co.,  141  S.  W.,  1023. 

Article  1139.  Legislature  May  Alter,  Reform  or  Amend. 
— All  charters  or  amendments  to  charters,  under  the 
provisions  of  this  chapter  ,shall  be  subject  to  the  power 
of  the  Legislature  to  alter,  reform  or  amend  the  same. 
(Act  April  23,  1874,  Sec.  9.) 

CHAPTER  III. 

POWERS  AND  DUTIES  OF  PRIVATE  CORPORATIONS  AND  DUTIES 
OF  STOCKHOLDERS   IN  REFERENCE   THERETO,   ETC. 

Article  1140.  General  Powers  of  Corporations. — Every 
private  corporation,  as  such,  has  power: 

1.  To  have  succession  by  its  corporate  name  for  the 
period  limited  in  its  charter,  not  to  exceed  fifty  years, 
and  when  no  period  is  limited,  for  twenty  years. 

2.  To  maintain  and  defend  judicial  proceedings. 

3.  To  make  and  use  a  common  seal. 

4.  To  purchase,  hold,  sell,  mortgage  or  otherwise  con- 
vey such  real  and  personal  estate  as  the  purposes  of  the  cor- 
poration shall  require,  and  also  to  take  hold,  and  convey 
such  other  property,  real,  personal,  or  mixed,  as  shall  be 
requisite   for    such   corporation    to    acquire    in    order   to 
obtain  or   secure   the   payment   of   any   indebtedness    or 
liability  due,  or  belonging  to,  the  corporation. 

5.  To  appoint  and  remove  such  subordinate  officers  and 
agents  as  the  business  of  the  corporation  shall  require, 
and  to  allow  them  a  suitable  compensation. 

6.  To    make   by-laws    not    inconsistent    with    existing 
laws  for  the  management  of  its  property,  the  regulation 
of  its  affairs  and  the  transfer  of  its  stock. 

7.  To  enter  into  any  obligation  or  contract  essential 
to  the  transaction  of  its  authorized  business. 


20  LAW  OF  OIL  AND  NATURAL  GAS 

8.  To  increase  or  diminish  by  a  vote  of  its  stock- 
holders, cast  as  its  by-laws  may  direct,  the  number  of 
its  directors  or  trustees,  to  be  not  less  than  three  nor  more 
than  twenty-one;  provided,  that  any  corporation  formed 
under  subdivisions  1,  2  and  3,  Article  1121,  may  increase 
the  number  of  its  directors  or  trustees  to  not  more  than 
twenty-five.  (Id.  Acts  1907,  p.  301.  Acts  1909,  p. 
225.  P.  D.,  5942.) 

NOTE. — Par.  1.  The  company  acquires  no  other  powers  than  right 
to  corporate  existence  except  as  these  are  conferred  by  the  statute. 
Ft.  Worth  etc.  By.  Co.  vs.  Bosedale  St.  Ey.  Co.,  68  Texas,  163,  7  S.  W., 
381 ;  Lyons-Thomas  Hdw.  Co.  vs.  Perry  Stove  Mfg.  Co.,  86  Texas,  149, 
22  L.  E.  A.,  802,  24  S.  W.,  16;  Scott  vs.  Farmers  &  M.  Nat'l  Bank, 
66  S.  W.,  495.  But  it  has  implied  authority  to  do  whatever  is  necessary 
or  appropriate  to  the  exercise  of  the  powers  expressly  given.  Dillard 
vs.  Lumber  Co.,  141  S.  W.,  1023.  It  may  foster  its  own  business  by 
such  means  as  are  usual  in  such  business  and  directly  beneficial ; 
but  not  by  unusual  means  of  only  indirect  benefit,  as  where  one 
street  railway  company  extended  its  credits  to  another  through  a 
joint  issue  of  bonds.  North  Side  Ey.  Co.  vs.  Worthington,  88  Texas, 
562,  30  S.  W»,  1055.  It  was  held  that  a  corporation  for  selling  liquor 
may  become  suretjr  on  the  bond  of  a  saloon-keeper,  as  a  means  of 
promoting  its  sales,  though  he  was  only  a  possible  customer.  Munoz 
vs.  Brassel,  108  S.  W.,  417.  But  the  contrary  was  held  as  to  the  power 
of  a  lumber  company  to  become  surety  on  a  building  contractor's 
bond.  W.  C.  Bowman  Lbr.  Co.  vs.  Pierson,  139  S.  W.,  618.  This 
latter  ruling  is  now  before  the  Supreme  Court  for  review,  it  having 
required  the  question  to  be  certified  because  of  conflict  in  the  de- 
cisions. Bank  vs.  Conner,  106  Texas, ,  172  S.  W.,  1106.  A  corpora- 
tion cannot  indorse  accommodation  paper.  Deaton  Gro.  Co.  vs.  Int. 
Harv.  Co.,  47  Texas  Civ  App.,  267,  105  S.  W.,  556;  Waller  vs.  Gorman 
Merc.  Co.,  141  S.  W.,  833.  Its  power  to  become  a  guarantor  or  surety 
for  another  is  limited  to  contracts  proper  for  the  promotion  of  the 
business  for  which  it  was  chartered.  Forty  Acre  L.  S.  Co.  vs.  West  Tex. 
Bk.  &  Tr.  Co.,  Ill  S.  W.,  417;  South  Tex.  Nat.  Bk.  vs.  LaGrange  Oil 
Mill  Co..  40  S.  W.,  328;  Gaston  &  Ayres  vs.  Campbell  Co.,  130  S.  W., 
222;  North  Tex.  St.  Bk.  vs.  Crowley-S.  Com.  Co.,  145  S.  W.,  1027.  It 
can  not  enter  into  partnership  with  others.  Markowitz  vs.  Greenwall 
Theat.  Circuit,  75  S.  W.,  74  ;  Sabine  Tram  Co.  vs.  Bancroft,  16  Texas 
Civ.  App.,  170,  40  S.  W.,  837.  It  may  act  as  trustee  in  matters  within 
scope  of  charter  powers.  Conley  vs.  Daughters  of  Bepublic,  151  S.  W., 
877. 

Par.   2.     Should  sue  or  be  siied  by  corporate  name.     Southern  Pac. 


LAW  OF  OIL  AND  NATURAL  GAS  21 

Co.  vs.  Burns,  23  S.  W,,  288.  Its  capacity  in  this  respect  is  the  same 
as  natural  persons.  Conley  vs.  Daughter  of  Republic,  151  S.  W.,  877. 
And  it  is  entitled  to  the  same  rights  of  action  and  measure  of  dam- 
ages. Eailway  Co.  vs.  Broussard,  69  Texas,  617,  7  S.  W.,  374  ;  Railway 
Co.  vs.  Telegraph  Co.,  69  Texas,  277,  5  Am.  St.,  45,  5  S.  W.  517.  It  may 
sue  its  members.  Article  1171  post.  Allegation  that  plaintiff  or  de- 
fendant is  incorporated  can  only  be  denied  under  oath.  Rev.  Stats. 
Article  1906. 

Par.  3.  Corporate  seal  is  required  in  conveyance  of  land.  Post, 
Article  1173.  But  not  to  a  sale  or  mortgage  of  chattels.  Fowler  vs. 
Bell,  35  S.  W.,  822. 

Par.  4.  As  to  right  to  acquire  and  hold  land,  see  post,  Article  1175 
and  note.  The  right  to  sell  is  an  incident  to  ownership.  Knowles 
vs.  Traction  Co.,  121  S.  W.,  232.  An  oil  company  may  lease  its  real 
piroperty  to  another  to  be  operated  for  it  by  the  lessee  on  a  royalty 
basis.  State  vs.  Guffey  Pet.  Co.,  85  S.  W.,  1084. 

Par.  5.  May  appoint  a  general  manager,  though  not  mentioned 
as  an  officer  in  charter  or  by-laws.  Hamni  vs.  Drew,  83  Texas,  77, 
18  S.  W.,  434;  M&rkowitz  vs.  Greenwall  Theat.  Circuit,  75  S.  W.,  74. 

Par.  6.  A  by-law  is  a  permanent  rule  for  conducting  the  corporate 
business,  as  distinguished  from  a  resolution  or  single  act.  Steger 
vs.  Davis,  8  Texas  Civ.  App.,  23,  27  S.  W.,  1068.  Power  to  make  and 
change  by-laws.  Gabel  vs.  Houston,  29  Texas,  336 ;  Tempel  vs.  Dodge, 

89  Texas,  68,  32  S.  W.,   514,  33   S.  W.,  222.     They  mjust  not  be  incon- 
sistent   with   charter.      Gabel    vs.    Houston    29    Texas,    336 ;    Clark    vs. 
Brown,  108  S.  W.,  421;  Mathis  vs.  Pridham,  1  Texas  Civ.  App.,  58,  20 
S.   W.,    1015.     May   create   a   contract   with   stockholder.     Howe   G.   & 
M.  Co.  vs.  Jones,  21  Texas  Civ.  App.,  198,  51  S.  W.,  24.     By-laws  regu- 
lating transfers  of  stock.    Seeligson  vs.  Brown,  61  Texas,  114.     As  to 
by-laws   of  benefit  society  as   affecting  the   rights   of  their   members, 
see :     Splawn  vs.  Chew,  60  Texas,  532 ;  Byrne  vs.  Casey,  70  Texas,  247, 
8  S.  W.,  38;  Knights  and  L.  of  H.  vs.  Grace,  60  Texas,  569;  Duer  vs. 
Supreme  Council,  21  Texas  Civ.  App.,  493,  52  S.  W.,   109 ;   Association 
vs.  Taylor,  23  Texas  Civ.  App.,  367,  56  S.  W.,   553;   Eversberg  vs.  Su- 
preme Tent,  33  Texas  Civ.  App.,   549,  77  S.  W.,  246;  Grand  Lodge  vs. 
Stumpf,  24  Texas  Civ.  App.,  309,  58  S.  W..  840  ;  Home  Circle  vs.  Shelton, 
81  S.  W.,  84  ;  Sovereign  Camp  vs.  Carrington,  41  Texas  Civ.  App.,  29, 

90  S.   W.,   921.     A  recent  and   important   discussion   of   the   power   to 
affect   the   rights    of   stockholders   by   by-laws   or   resolutions   will    be 
found  in  Yeaman  vs.  Galveston  City  Co.,  106  Texas, ,  167  S.  W.,  710. 

Par.  7.  See  note  under  paragraph  1  above,  as  to  the  implied  powers 
conferred  on  corporations.  May  borrow  money,  and  for  that  purpose 
may  guaranty  the  note  of  another  to  the  extent  that  it  receives  pro- 
ceeds. Gaston  &  Ayres  vs.  Campbell  Co.,  104  Texas,  576 ;  Waller  vs. 
Gorman  Merc.  Co.,  141  S.  W.,  833.  May  issue  and  sell  bonds.  Article 
1162  post  and  note.  Corporation  can  make  only  such  contracts  as  are 


22  LAW  OF  OIL  AND  NATURAL  GAS 

essential  or  proper  to  carrying  on  its  authorized  business.  Contracts 
not  within  the  scope  of  such  business  are  invalid.  Thus :  Acquiring 
land  not  for  corporate  purpose.  Scott  vs.  Bank,  66  S.  W.,  495.  Ex- 
change of  land  for  personal  property.  Land  Co.  vs.  McCormick,  85 
Texas,  416.  Lending  its  credit  to  another  company  by  joint  issue 
of  bonds.  North  Side  Ry.  Co.  vs.  Worthington,  88  Texas,  562,  30  S.  W., 
1055.  As  to  its  power  to  become  guarantor  or  surety  for  another 
see,  further,  note  to  paragraph  one  above.  Persons  contracting  with 
the  corporation  for  consideration  received  are  estopped  from  denying 
its  power  to  make  the  contract.  Bond  vs.  Terrell  Mfg.  Co.,  82  Texas, 
309,  18  S.  W.,  691;  Petroleum.  Co.  vs.  Townsite  Co.,  48  Texas  Civ. 
App.,  555,  107  S.  W.,  609;  Smith  vs.  White,  25  S.  W.,  809;  Keys  vs. 
Building  .&  L.  Assn.,  25  S.  W.,  809 ;  Bond  vs.  Mfg.  Co.,  82  Texas,  309.  The 
corporation  is  also  estopped  from  claiming  that  its  act  was  invalid, 
as  beyond  its  charter  powers,  so  far  as  it  has  received  benefits.  Live- 
stock Co.  vs.  Bank  &  Tr.  Co.,  Ill  S.  W.,  417;  Gaston  &  Ayres  vs. 
Campbell  Co.,  130  S.  W.,  222 ;  Kincheloe  Irr.  Co.  vs.  Hahn  Bros.  &  Co., 
146  S.  W.,  1187;  Cont.  Fire  Assn.  vs.  Masonic  Temple  Co.,  26  Texas 
Civ.  App.,  139,  62  S.  W.,  930.  But  neither  party  is  estopped  while  the 
contract  remains  wholly  executory.  San  Antonio  Hdw.  Co.  vs.  Sanger, 
151  S.  W.,  1104. 

Article  1141.  Unpaid  Stock  Payable  When;  Proof  of 
Payment. — The  stockholders  of  all  corporations  chartered 
as  provided  in  Articles  1125  to  1128,  inclusive,  as  modi- 
fied by  Article  1129,  shall,  within  two  years  from  the 
date  of  the  filing  of  such  charter  by  the  Secretary  of 
State,  pay  in  the  unpaid  portion  of  the  capital  stock 
of  such  company;  proof  of  which  shall,  within  said 
time,  be  made  to  the  Secretary  of  State,  in  the  manner 
provided  in  Articles  1126  to  1128,  inclusive,  for  the 
filing  of  charter.  (Acts  1907,  p.  309,  Sec.  2.) 

Article  1142.  On  Default  of  Payment,  Secretary  of 
State  to  Forfeit  Charter,  How. — In  case  of  failure  to  pay 
the  unpaid  portion  of  capital  stock,  and  to  make  proof 
thereof  to  the  Secretary  of  State  within  two  years  from 
the  date  of  the  filing  of  the  charter,  the  charter  of 
such  company  shall,  because  thereof,  become  forfeited; 
which  forfeiture  shall  be  consummated  without  judicial 
ascertainment  by  the  Secretary  of  State  entering  upon 
the  margin  of  the  ledger  kept  in  his  office  relating  to 
such  corporations  the  word  "forfeited,"  giving  the  date 
and  reason  therefor.  (Id.) 


LAW  OF  OIL  AND  NATURAL  GAS  23 

Article  1143.  Notification  of  forfeiture;  Record  of 
Same;  Relief  from  Forfeiture  Within  Six  Months,  Con- 
ditions of,  Etc.;  Revival. — The  Secretary  of  State  shall 
notify  such  corporations  by  mailing  to  the  postoffice 
named  as  its  principal  place  of  business,  or  to  any  other 
place  of  business  of  such  corporation,  addressed  in  its 
corporate  name,  a  written  or  printed  statement  of  the 
date  and  fact  of  such  forfeiture ;  a  record  of  the  date  and 
fact  of  such  notice  must  be  kept  by  such  officer;  pro- 
vided, that  the  stockholders  of  any  such  corporation 
whose  charter  has  been  forfeited  as  above  provided  who 
shall,  within  six  months  from  the  date  of  such  forfeiture, 
and  not  thereafter,  pay  in  full  the  unpaid  capital  stock  of 
such  company  and  furnish  to  the  Secretary  of  State 
proof  of  such  fact  as  required  herein,  and,  in  addition, 
shall  pay  the  Secretary  of  State,  as  fees  belonging  to 
his  office,  the  sum  of  five  dollars  per  month  for  each 
month  and  fractional  part  thereof  between  the  date  of 
forfeiture  and  settlement,  the  company  shall  be  re- 
lieved from  such  forfeiture;  and  said  officer  shall  write 
on  the  margin  of  said  ledger  the  word  "revived,"  giving 
the  date  thereof.  (Id.) 

Article  1144.  On  Failure  to  Revive,  Affairs  of  Cor- 
poration Wound  up;  Provided  Right  to  Avoid  For- 
feiture Within  Two  Years,  But  no  Prejudice  to  Creditor. 
— If  the  stockholders  should  fail  to  cause  the  charter 
powers  of  said  corporation  to  be  revived,  as  just  pro- 
vided, then,  and  in  such  event,  the  affairs  of  such  com- 
pany shall  be  administered  and  wound  up  as  on  disso- 
lution; provided,  however,  the  stockholders  of  any  such 
company  shall  have  the  right,  at  any  time  within  the 
two  years  given,  to  make  payment  of  the  unpaid  portion 
of  the  capital  stock,  to  reduce  the  same  so  that  by  re- 
duction, or  reduction  and  payment,  the  full  amount  of 
the  capital  stock  authorized  by  such  reduction  shall  be 
paid,  and  thus  avoid  a  forfeiture  of  the  charter;  but  no 
creditor  of  said  company  shall  in  anywise  be  prejudiced 
by  such  reduction  of  its  capital  stock  in  any  claim  or 


24  LAW  OF  OIL  AND  NATURAL  GAS 

cause    of   action    such    creditor    may    have    against    such 
company  or  any  stockholder  or  officers  thereof.     (Id.) 

Article  1145.  May  Increase  Its  Capital  Stock,  How. — 
A  corporation  may  increase  its  authorized  capital  by  a 
two-thirds  vote  of  all  its  stock;  provided,  that  no 
stock  shall  be  issued  except  for  money  paid,  labor  done 
or  property  actually  received.  And  when  such  vote  is 
given  in  favor  of  the  increase,  the  same  may  be  done 
by  the  board  of  directors,  trustees,  or  managing  board, 
of  such  corporation;  and,  upon  such  increase  of  stock 
being  made  in  accordance  with  the  above  provisions  and 
certified  to  the  Secretary  of  State  by  the  directors, 
together  with  satisfactory  proof,  which  shall  be  the  affi- 
davit of  the  directors  showing  that  the  full  amount 
of  the  increase  has  been  in  good  faith  subscribed,  and 
fifty  per  cent  thereof  paid,  and  in  other  respects  con- 
forming to  the  proof  required  as  an  original  application 
for  charter,  or  showing  that  such  portion  thereof  has 
been  subscribed  or  subscribed  and  paid,  as  is  required 
for  the  corporation,  thus  increasing  its  stock,  and,  if  the 
Secretary  of  State  is  satisfied  that  the  increase  of  stock 
has  been  made  in  accordance  with  law  and  that  the  re- 
quirements of  law  have  been  complied  with  as  to  the 
subscription  and  payment  of  stock  and  in  other  respects, 
as  on  an  original  application  for  charter,  he  shall  file 
such  certificate  of  increase;  and  thereupon  the  same  shall 
become  a  part  of  the  capital  stock  of  such  corporation. 
Such  certificate  shall  be  filed  and  recorded  in  the  same 
manner  as  the  charter.  (Id.,  Sec.  3.) 

NOTE. — Previous  to  the  Act  of  1907,  Session  Laws,  p.  310,  Section  3, 
Article  576,  Rev.  Stats..  1876.  Article  652,  Rev.  Stats.,  1895,  permitted  in- 
crease of  capital  stock  only  to  double  the  amount  of  its  authorized 
capital.  It  was  held  that  an  amendment  to  the  charter  under  Article 
571,  Rev.  Stats.,  1876,  Article  647,  Rev.  Stats.,  1895  (Article  1133,  ante) 
was  subject  to  the  same  restriction,  and  invalid  if  it  increased  the 
stock  beyond  such  limit.  Kampmann  vs.  Tarver,  87  Texas,  491,  29  S. 
W.,  768.  But  the  limit  appears  to  be  removed  by  the  present  article, 
which  is  found  in  the  Act  of  1907. 


LAW  OF  OIL  AND  NATURAL  GAS  25 

Article  1146.  Watering  Stock  Prohibited;  Forfeiture 
for  Violation. — No  corporation,  domestic  or  foreign,  do- 
ing business  in  the  State,  shall  issue  any  stock  whatever, 
except  for  money  paid,  labor  done,  which  is  reasonably 
worth  at  least  the  sum  at  which  it  was  taken  by  the 
corporation,  or  property  actually  received,  reasonably 
worth  at  least  the  sum  at  which  it  was  taken  by  the 
company.  Any  corporation  which  violates  the  provisions 
of  this  article  shall,  on  proof  thereof  in  any  court  of 
competent  jurisdiction,  forfeit  its  charter,  permit  or 
license,  as  the  case  may  be,  and  all  rights  and  franchises 
which  it  holds  under,  from  or  by  virtue  of  the  laws  of  this 
State.  (Id.  Sec.  5;  Constitution,  Art.  12,  Sec.  6.) 

NOTE. — Stock  being  only  authorized  to  issue  for  money  paid  to, 
property  received  by,  or  labor  done  for  the  corporation,  money  paid 
or  services  rendered  previous  to  incorporation  in  promotion,  sales 
of  stock,  and  other  preliminary  expenses,  can  not  be  made  the  basis 
of  corporate  liability,  much  less  of  stock  issues.  Weatherford  etc. 
Ky.  Co.  vs.  Granger,  86  Texas,  350,  24  S.  W.,  795.  Money  paid  means 
cash.  It  may  be  payable  in  installments ;  but  stock  can  not  be  issued 
for  money  to  be  paid  by  subscriber  "at  such  time  as  he  could  ar- 
range." San  Antonio  Irr.  Co.  vs.  Deutschmann,  102  Texas,  201,  114 
S.  W!.,  1174.  The  property  must  be  of  a  substantial  character,  such  as 
could  be  subjected  to  payment  of  claims  against  the  corporation  and 
secure  stockholders  in  their  rights ;  and  an  unpatented  secret  formula 
for  a  compound  to  prevent  gasoline  from  exploding  was  not  such 
property.  O'Bear-Nester  Glass  Co.  vs.  Anti-explo  Co.,  101  Texas,  431, 
108  S.  W.,  967.  It  must  be  such  as  the  corporation  by  its  charter 
was  authorized  to  hold.  See  opinion  of  Attorney  General  on  Blue 
Sky  Law,  post  p.  106.  The  labor  performed  must  be  labor  for  the 
corporation,  not  labor  in  its  promotion.  Neither  can  such  promotion 
expenses,  save  in  a  few  excepted  particulars,  attorneys  fees,  charter 
fees,  franchise  ta,x,  etc.,  be  paid  out  of  the  proceeds  of  sale  of  stock, 
as  debts  of  the  corporation.  See  "Blue  Sky  Law,"  by  which  these 
matters  are  fully  regulated,  post  pp.  72-81.  A  contract  by  the 
promoter,  which  the  corporation  subsequently  adopts,  and  of  which 
it  receives  the  benefit,  may  be  made  the  basis  of  corporate  liability; 
but  not  the  promoter's  services,  before  incorporation,  in  obtaining 
such  contract.  Weatherford  etc.  Ry.  Co.  vs.  Granger,  86  Texas,  350, 
24  S.  W.,  795.  See,  also,  Article  1165,  post. 

A  general  statement  of  the  rights  of  the  promoter  arising  out  of 
things  done  before  incorporation  may  be  made  in  these  terms :  For 
all  property  or  rights  which  the  corporation  takes  over  from  him  for 


26  LAW  OF  OIL  AND  NATURAL  GAS 

its  purposes,  he  may  receive  in  stock  their  fair  value  at  the  time  of 
incorporation.  By  this  means  he  may  get  compensation  for  his  services 
in  acquiring,  prospecting,  developing,  etc.,  so  far  as  these  have  been 
fruitful  in  enhancing  the  value  up  to  the  time  such  property  passes 
to  the  corporation.  But  these  services  and  expenditures  were  ren- 
dered to  himself,  not  to  the  corporation.  It  owes  no  debt  for  them ; 
can  not  issue  him  stock  for  them ;  can  not  pay  him  for  them  out 
of  the  sale  of  stock  to  others.  Of  organization  expenses  incurred,  a 
few  (attorneys  fees,  charter  and  license  fees,  etc.)  the  corporation  may 
pay  out  of  its  capital  received  from  the  sale  of  stock.  As  to  all  others 
it  can  not  reimburse  the  promoters  either  by  issuing  them  stock  or 
paying  them  from  sales  of  stock,  at  least  such  appears  to  be  the  con- 
struction of  the  act  by  the  Attorney  General.  But  as  to  this  see  note, 
po.st,  on  p.  108. 

Article  1147.  Watered  Stock  and  Bonds  not  for  Money, 
Etc.,  Quo  Warranto  Suit  to  Cancel. — Where  any  corpora- 
tion has  issued  and  has  outstanding  any  stocks  or 
bonds,  given  or  issued  for  any  purpose,  other  than  money 
paid  to,  labor  done  for,  or  property  actually  received  by 
the  corporation,  it  shall  be  the  duty  of  the  Attorney 
General  of  this  State,  when  convinced  that  the  facts  exist 
which  authorize  the  action,  to  institute  quo  warranto  or 
other  appropriate  judicial  proceedings  in  some  court  of 
competent  jurisdiction  in  Travis  county,  or  in  any  other 
county  of  this  State  where  such  corporation  may  be 
sued,  to  have  any  stocks  or  bonds  issued  in  violation 
of  the  Constitution  and  statutes  of  this  State,  canceled, 
expunged  and  held  for  naught;  and,  within  the  meaning 
of  the  above,  is  included  any  bond  or  stock  given  in  re- 
newal, or  in  lieu  of  any  originally  issued,  for  purposes 
other  than  those  mentioned  above,  also  any  issued  by 
any  corporation  with  which  the  corporation  originally 
issuing  any  such  stocks  or  bonds  has  merged  or  been 
consolidated  and  given  by  said  issuing  corporation,  in 
the  place  of  those  originally  issued  for  purposes  other 
than  as  mentioned  above.  (Acts  1907,  p.  342,  Sec.  3.) 

Article  1148.  Suit  May  be  Dismissed  or  not  Brought 
Under  What  Conditions. — If  any  suit  authorized  under 
Article  1147  has  been  instituted,  the  same  shall  be  dis- 
missed at  the  cost  of  the  defendant,  or  if  not  instituted, 
no  action  shall  be  brought,  if  the  defendant  corporation 


LAW  OF  OIL  AND  NATURAL  GAS  27 

shall  surrender,  or  cause  to  be  surrendered,  to  the  court 
or  to  the  Railroad  Commission  of  Texas,  for  destruction, 
all  such  illegal  stocks  complained  of,  and  also  the  illegal 
bonds  complained  of,  with  proper  and  legal  releases  there- 
of, suitably  executed  for  record,  with  such  other  written 
evidences  and  documents  as  may  be  necessary  to  show  that 
such  stocks  or  bonds  are  no  longer  outstanding  against 
the  corporation.  (Id.,  Sec.  4.) 

Article  1149.  Remedies  Cumulative. — The  rights  and 
remedies  given  by  the  last  two  articles  are  cumulative, 
and  shall  not  affect,  change  or  repeal  any  other  remedies 
or  rights  now  existing  in  this  State  for  the  enforcement, 
payment,  or  collection  of  fines,  forfeitures  and  penalties. 
(Id.,  Sec.  6.) 

Article  1150.  Increase  in  Certain  Cases  Validated. — 
That  in  all  cases  where  the  amount  of  the  capital  stock 
of  any  corporation  has  heretofore  been  increased  by 
more  than  one  increase  thereof  to  an  amount  in  excess 
of  double  the  amount  of  the  original  capital,  and  such 
increase  has  been  made  with  the  sanction  of  the  Secretary 
of  State,  under  his  construction  of  the  law,  such  increase 
shall  be,  and  the  same  is  hereby,  validated  and  declared 
legal.  (Acts  1893,  p.  123.) 

Article  1151.  Unpaid  Increase  of  Stock  Payable  When; 
Forfeiture  for  Default. — In  case  of  failure  by  the  stock- 
holders to  .pay  the  unpaid  portion  of  an  increase  of 
stock  within  two  years  from  the  date  of  the  filing  of 
the  certificate  of  increase  in  the  office  of  the  Secretary 
of  State,  the  charter  of  such  company  shall  be  forfeited; 
and  the  provisions  of  Article  1145  of  this  chapter  shall 
govern  the  same,  as  in  case  of  an  original  creation  of 
a  corporation.  (Acts  1907,  p.  311,  Sec.  3.) 

Article  1152.  May  Decrease  Stock,  How. — A  corpora- 
tion may  decrease  its  capital  stock  by  such  amount  as 
its  stockholders  may  decide  by  a  two-thirds  vote  of  all 
its  outstanding  stock,  in  like  manner  as  is  required  for 
an  increase  as  above  provided;  but  no  such  decrease  shall 
prejudice  the  rights  of  any  creditor  of  such  corporation 
in  any  claim  or  cause  of  action  such  creditor  may  have 


28  LAW  OF  OIL  AND  NATURAL  GAS 

against  the  company,  or  any  stockholder  or  director  there- 
of; nor  shall  such  decrease  become  effective  until  full  proof 
is  made  by  affidavit  of  the  directors  to  the  Secretary  of 
State  of  the  financial  condition  of  such  corporation,  giv- 
ing therein  all  its  assets  and  liabilities,  with  names  and 
postoffice  addresses  of  all  creditors  and  amount  due 
each;  and  the  Secretary  of  State  may  require,  as  a 
condition  precedent  to  the  filing  of  such  certificate  of 
decrease,  that  the  debts  of  such  corporation  be  paid  or 
reduced.  (Id.,  Sec.  3.) 

Article  1153.  Quorum  of  Directors  and  Annual  Elec- 
tions.— A  majority  of  the  directors  or  trustees  shall  con- 
stitute a  quorum,  and  be  competent  to  fill  vacancies  in 
the  board,  and  to  transact  all  business  of  the  corporation. 
An  annual  election  shall  be  held  for  directors  or  trustees, 
at  such  time  and  place  as  the  by-laws  of  the  corporation 
may  require.  (Id.,  Sec.  15.  P.  D.,  5946.) 

Article  1154.     President  and  Secretary  to  be  Chosen. — 

The  directors  or  trustees  shall  choose  one  of  their  num- 
ber president,  and  shall  appoint  a  secretary  and  treasurer 
and  such  other  officers  as  they  may  deem  necessary  for 
the  corporation.  (Id.,  Sec.  16.  P.  D.,  5947.) 

Article  1155.  By-laivs  May  be  Adopted,  Altered,  Etc. — 
The  directors  or  trustees  may  adopt  by-laws  for  the 
government  of  the  corporation;  but  such  by-laws  may  be 
altered,  changed  or  amended  by  a  majority  vote  of  the 
stockholders  at  any  election  or  special  meeting  ordered  for 
that  purpose  by  the  directors  or  trustees,  on  a  written 
application  of  a  majority  of  the  stockholders  or  members. 
(Id.,  Sec.  17.  P.  D.,  5948.) 

Article  1156.  May  Increase  Number  of  Directors  or 
Trustees. — All  corporations  heretofore  created,  and  now 
in  existence,  under  any  law  of  this  State,  are  hereby 
authorized  to  increase  the  number  of  directors  or  trus- 
tees of  any  such  corporation.  (Id.,  Sec.  18.  P.  D.,  5949.) 

Article  1157.  Failure  to  Elect  Directors  Shall  Not 
Dissolve,  Etc. — In  case  it  should  happen  that  an  election 
for  directors  or  trustees  should  not  be  held  on  the  day 
appointed  by  the  by-laws  of  any  corporation,  such  cor- 


LAW  OF  OIL  AND  NATURAL  GAS  29 

poration  shall  not,  for  that  reason,  be  deemed  to  be  dis- 
solved; but  it  shall  be  lawful  on  any  other  day  to  hold 
a  meeting  and  elect  its  directors  or  trustees,  in  such 
manner  as  shall  be  prescribed  by  the  by-laws  thereof. 
(Id.,  Sec.  19.  P.  D.,  5950.) 

NOTE. — Faihire  to  elect  directors  will  not  prevent  recognition  as  a 
de  facto  corporation.  Conley  vs.  Daughters  of  Kepublic,  151  S.  W.,  883. 

Article  1159.  Directors  Shall  Have  General  Mange- 
ment,  Etc. — The  directors  or  trustees  shall  have  the 
general  management  of  the  affairs  of  the  corporation, 
and  may  dispose  of  the  residue  of  the  capital  stock,  at 
any  time  remaining  unsubscribed,  in  such  manner  as  the 
by-laws  may  prescribe.  (Id.,  Sec.  21.  P.  D.,  5952.) 

Article  1160.  Directors  Shall  Cause  Record  to  be  Kept, 
Etc. — They  shall  cause  a  record  to  be  kept  of  all  stock  sub- 
scribed and  transferred,  and  of  all  business  transactions; 
and  their  books  and  records  shall,  at  all  reasonable  times, 
be  open  to  the  inspection  of  any  and  every  stockholder. 
(Id.,  Sec.  21.) 

Article  1161.  Shall  Report  to  Stockholders  and  Make 
Dividends. — They  shall,  also,  when  required  by  one-third 
of  the  stockholders  thereof,  present  reports  in  writing  of 
the  situation  and  amount  of  business  of  the  corporation, 
and  declare  and  make  such  dividends  of  the  profits  from  the 
business  of  the  corporation  as  they  shall  deem  expedient, 
or  as  the  by-laws  may  prescribe.  (Id.,  Sec.  21.) 

Article  1162.  May  Borrow  Money. — Corporations  shall 
have  power  to  borrow  money  on  the  credit  of  the  corpora- 
tion, not  exceeding  its  authorized  capital  stock,  and  may 
execute  bonds  or  promissory  notes  therefor,  and  may 
pledge  the  property  and  income  of  the  corporation.  (Acts 
1883,  p.  98,  Sec.  13.  P.  D.,  5944.) 

NOTE. — The  corporation  can  issue  bonds  only  for  its  own  benefit,  not 
for  that  of  another.  North  Side  Eailway  Co.  vs.  Worthington,  88 
Texas,  562,  30  S.  W.,  1055.  It  may  pledge  its  property  for  payment. 
Pumphrey  vs.  Threadgill,  9  Texas  Civ.  App.,  184,  28  S.  W.,  450.  And 
may  pledge  its  bonds  for  borrowed  money.  Western  S.  &  M.  Co. 


30  LAW  OF  OIL  AND  NATURAL  GAS 

TS.  U.  S.  &  Mex.  Trust  Co.,  41  Texas  Civ.  App.,  478,  92  S.  W.,  986. 
It  may  issue  bonds  for  property  received.  Thayer  vs.  Wathen,  17 
Texas  Civ.  App.,  382,  44  S.  W.,  906.  And  may  sell  its  bonds  at  a 
discount.  North  Side  Ey.  Co.  vs.  Worthington,  88  Texas,  562,  30  S.  W., 
1'055 ;  Mathis  vs.  Pridham!,  1  Texas  Civ.  App.,  58,  20  S.  W.,  1015. 

Article  1164.  Corporation  Restricted  to  Objects  of  Its 
Creation. — No  corporation,  domestic  or  foreign,  doing  bus- 
iness in  this  State,  shall  employ  or  use  its  stock,  means, 
assets,  or  other  property,  directly  or  indirectly,  for  any 
other  purpose  whatever  than  to  accomplish  the  legiti- 
mate objects  of  its  creation  or  those  permitted  by  law. 
(Acts  1907,  p,  312,  Sec.  5.) 

Article  1165.  Restrictions  Upon  Creation  of  Debts. — 
No  corporation,  domestic  or  foreign,  doing  business  in 
this  State,  shall  create  any  indebtedness  whatever  except 
for  money  paid,  labor  done,  which  is  reasonably  worth 
at  least  the  sum  at  which  it  was  taken  by  the  corporation, 
or  property  actually  received,  reasonably  worth  at  least 
the  sum  at  which  it  was  taken  by  the  corporation.  (Id.) 

Article  1166.  Contributions  to  Political  Parties  or 
Candidates,  Etc.,  By  Corporation  Officers,  Etc.,  Forbidden. 
— No  corporation,  domestic  or  foreign,  doing  business  in 
the  State  shall,  directly  or  indirectly,  contribute  or  pay 
any  part  of  its  assets,  property  or  funds  to  any  political 
party,  or  .to  any  officer  or  campaign  manager  of  any 
political  party,  or  to  any  person  whatsoever,  for  or  on 
account  of  such  party,  nor  to  any  candidate  for  any 
office,  before  or  after  nominations  are  made,  or  to  aid 
in  defraying  the  expenses  of  any  candidate  for  office, 
or  to  any  person  for  or  on  account  of  aid  in  defraying 
the  expenses  of  a  candidate  for  office,  or  to  any  person 
whatsoever,  for,  or  on  account  of  aid  in  maintaining  or 
defraying  the  expenses  of  any  campaign  or  political  head- 
quarters, or  to  any  person  whatsoever,  for  or  on  account 
of  the  success  or  defeat  of  any  question  to  be  voted  upon 
by  the  qualified  voters  of  this  State,  or  any  subdivision 
thereof.  (Acts  1907,  p.  312,  Sec.  5.) 

Article  1167.  Penalty  for  Violation  of  Either  of  the 
Last  Three  Preceding  Articles. — Any  corporation  which 


LAW  OF  OIL  AND  NATURAL  GAS  31 

shall  violate  any  of  the  provisions  of  either  of  the  three 
last  preceding  articles,  shall,  on  proof  thereof  in  any 
court  of  competent  jurisdiction,  forfeit  its  charter,  per- 
mit or  license,  as  the  case  may  be,  and  all  rights  and 
franchises  which  it  holds  under,  from,  or  by  virtue  of, 
the  laws  of  this  State. 

Whenever  it  appears  that  the  money,  assets,  property,  or 
funds  of  a  corporation  have  been  issued,  paid  out  or  used, 
in  violation  of  any  of  the  provisions  of  either  of  the  three 
last  preceding  articles,  by  any  agent,  attorney,  director, 
or  officer  of  such  corporation,  it  shall  be  held  and  con- 
sidered the  act  of  the  corporation,  unless,  within  one 
year  from  the  date  of  such  violation,  it  has  caused  to  be 
entered  through  its  board  of  directors  on  its  records  in 
this  State,  an  order  repudiating  the  wrong  and  perman- 
ently dismissing  from  its  service  all  persons  directly  or 
indirectly  connected  with  such  violation.  (Id.,  Sec.  5.) 

Article  1168.  Stock  of  Corporation  is  Personal  Estate. 
— The  stock  of  any  corporation  created  under  this  title 
shall  be  deemed  personal  estate,  and  shall  be  transferable 
only  on  the  books  of  the  corporation  in  such  manner  as  the 
by-laws  may  prescribe.  (Id.,  Sec.  24.  P.  D.,  5955.) 

Article  1169.  Directors  May  Require  Payment  of  Stock. 
— The  board  of  directors  or  trustees  of  any  corporation 
may  require  the  subscribers  to  the  capital  stock  of  the 
corporation  to  pay  the  amount  by  them  respectively  sub- 
scribed, in  such  manner,,  and  in  such  installments,  as 
may  be  required  by  the  by-laws.  (Id.,  Sec.  25.  P.  D., 
5956.) 

Article  1170.  Stock  Forfeited,  When  and  How. — If  any 
stockholder  shall  neglect  to  pay  any  installment,  as 
required  by  the  board  of  trustees,  the  directors  or  trustees 
may  declare  his  stock  and  all  previous  payments  forfeited 
to  the  use  of  the  company;  but  no  stock  shall  be  for- 
feited until  the  directors  or  trustees  have  caused  a 
notice  in  writing  to  be  served  on  him  personally,  or  by 
depositing  the  same  in  the  postoffice,  properly  directed 
to  him  at  the  post  office  nearest  his  usual  place  of 
residence,  stating  that  he  is  required  to  make  such  payment 


32  LAW  OF  OIL  AND  NATURAL  GAS 

at  the  time  and  place  specified  in  said  notice,  and  that 
if  he  fails  to  make  the  same  his  stock  and  all  previous 
payments  thereon  will  be  forfeited  for  the  use  of  the 
company;  which  notice  may  be  served,  as  aforesaid,  at 
least  thirty  days  previous  to  the  day  on  which  such 
payment  is  required  to  be  made.  (Id.,  Sec.  26.  P.  D., 
5957.) 

Article  1171.  Corporation  May  Sue  Its  Own  Members. 
— All  bodies  corporate  may  sue  for,  recover  and  receive 
from,  their  respective  members  all  arrears  or  other 
debts,  dues  or  other  demands  which  are  now,  or  hereafter 
may  be,  owing  to  them,  in  like  mode,  manner  and  form 
as  they  might  sue  for,  recover  and  receive  the  same 
from  any  person  not  a  member  of  their  body.  (Id.,  Sec. 
27.  P.  D.,  5958.) 

Article  1172.  Misnomer  Shall  Not  Vitiate. — No  mis- 
nomer of  any  corporation  shall  defeat  or  vitiate  any  gift, 
grant,  conveyance,  devise,  or  bequest  to  the  same.  (P.  D., 
5965.) 

Article  1173.  Corporation  May  Convey  Lands,  How. — 
Any  corporation  may  convey  lands  by  deed,  sealed  with 
the  common  seal  of  the  corporation,  and  signed  by  the 
president  or  presiding  member  or  trustee  of  said  cor- 
poration, or  in  common  form  without  seal  by  its  attorney 
in  fact,  where  the  instrument  constituting  such  attorney 
in  fact  is  executed  in  said  manner  first  mentioned;  and 
such  deed,  when  acknowledged  by  such  officer  or  attorney 
in  fact  to  be  the  act  of  the  corporation,  or  proved  in 
the  manner  prescribed  for  other  conveyances  of  lands, 
may  be  recorded  in  like  manner  and  with  the  same  effect 
as  other  deeds;  and  all  conveyances  by  corporations 
heretofore  executed  in  the  manner  herein  set  forth  shall 
be  held  valid  so  far  as  regards  the  manner  of  execution. 
(Acts  1905,  p.  230.  P.  D.,  5966.) 

Article  1174.  Principal  Office  Must  Be  Kept  in  State. — 
Each  corporation  or  joint  stock  company  of  every  de- 
scription, whether  organized  and  acting  under  a  special 
charter  or  general  law  of  the  State,  shall  keep  its  principal 
office  within  this  State.  (P.  D.,  5962.) 


LAW  OF  OIL  AND  NATURAL  GAS  33 

CHAPTER  IV. 

LAND — ACQUISITION,  ETC.,  OF,  RESTRICTED. 

Article  1175.  Purchase  of  Land,  Unless  Necessary  to 
Business  or  to  Secure  Debts,  Prohibited. — No  private  cor- 
poration shall  be  permitted  to  purchase  any  land  under  the 
provisions  of  this  chapter,  unless  the  lands  so  pur- 
chased are  necessary  to  enable  such  corporation  to  do 
business  in  this  State,  or  except  where  such  land  is 
purchased  in  due  course  of  business,  to  secure  the  pay- 
ment of  debt.  (Acts  1893,  p.  36.  Acts  1897,  p.  48.) 

NOTE. — The  right  of  the  corporation  to  purchase  and  hold  the  land 
can  only  be  questioned  by  the  State.  Scott  vs.  Farmers  and  M.  Natl. 
Bank,  97  Texas,  57,  104  Am.  St.,  835,  75  S.  W.,  7;  S.  C.  Civ.  App.,  66 
S.  W..  485;  Knowles  vs.  Northern  Texas  Trac.  Co.,  121  S.  W.,  232; 
Schwab  Cloth.  Co.  vs.  Claunch.  29  S.  W.,  922 ;  Eay  vs.  Foster,  53  S.  W.. 
54.  But  it  can  not  compel  the  execution  of  a  conveyance  from  a 
trustee  of  land  it  has  no  right  to  acquire.  Scott  vs.  Bank,  66  S.  W., 
495.  And  lands  acquired,  but  which  it  had  no  power  to  take  and  hold, 
may  be  subjected  to  claims  of  its  creditors.  Bank  vs.  Construction 
Co.,  138  S.  W.,  443. 

Article  1176.  Excess  of  Land  Over  Necessary  Amount 
to  be  Alienated,  When. — All  private  corporations  authoriz- 
ed by  the  laws  of  Texas,  as  provided  in  Article  1121, 
to  do  business  in  this  State,  whose  main  purpose  is  not 
the  acquisition  or  ownership  of  lands,  as  mentioned  in 
preceding  articles,  which  have,  heretofore,  or  may  here- 
after, acquire  by  lease,  purchase  or  otherwise  more  land 
than  is  necessary  to  enable  them  to  carry  on  their  business, 
shall,  within  fifteen  years  from  the  time  this  law  takes 
effect,  or  the  date  said  land  may  be  hereafter  acquired, 
in  good  faith,  sell  and  convey  in  fee  simple  all  lands  so 
acquired,  and  which  are  not  necessary  for  the  trans- 
action of  their  business.  (Id.) 


34  LAW  OF  OIL  AND  NATURAL  GAS 

CHAPTER  V. 

REPORTS  BY  CERTAIN  CORPORATIONS. 

Article  1182.  Certain  Corporations  to  Make  Reports 
to  Secretary  of  State. — Every  corporation  within  this 
State  owning,  leasing  or  operating  in  this  State,  in  cities 
or  towns  of  over  twenty-five  hundred  population,  ac- 
cording to  the  last  official  census  of  the  United  States, 
a  street  railway,  electric  lighting  or  power  plant  furnish- 
ing light  and  power  to  the  public,  gas  plant  furnishing 
gas  to  the  public,  water  plant  furnishing  water  to  the 
public,  and  sewerage  company  furnishing  sewerage  to 
the  public,  shall  annually,  on  or  before  the  first  day  of 
March  of  each  year,  file  a  report  with  the  Secretary  of 
State,  upon  blank  forms  to  be  furnished  by  the  Secretary 
of  State,  showing  the  following  facts: 

1.  The  authorized   capital   stock  of  such   corporation, 
the  amount  of  such  stock,  that  has  actually  been  issued, 
and  how  much  of  such  stock  actually  issued  is  common, 
and  how  much  preferred,  and  how  much  is  due  upon  un- 
paid stock. 

2.  The  bonded  indebtedness  of  such  corporation,  and 
how   many   bonds   have   been   actually   sold,   the   rate  of 
interest  upon  such  bonds,  and  when  such  bonds  mature, 
and  the  price  at  which  such  bonds  were  sold. 

3.  Any  other  fixed  lien  or  mortgage  upon  such  prop- 
erty, and  the  amount  thereof. 

4.  The  floating  indebtedness  of  such  corporation,   in- 
cluding all  bills  payable  of  whatever  nature. 

5.  The  value  of  the  visible  tangible  property  of  such 
corporation,  giving  separate  values  of  lands,  machinery, 
buildings,  tracks  and  equipment,  and  in  gross,  all  bills 
receivable   and   cash   on  hand. 

6.  The    annual    cost    of    operating    such    corporation, 
showing   under   separate   items:      (a)    amount   paid   for 
salaries;   (b)   amount  paid  for  labor;  (e)   fixed  charges, 
including    interest,    taxes    and    insurance,    giving    each 


LAW  OF  OIL  AND  NATURAL  GAS  35 

separately;  (d)  amount  paid  for  fuel;  (e)  amount  paid 
for  extensions,  repairs  and  maintenance,  giving  each 
separately;  (f)  amount  paid  for  claims  or  suits  for 
damages;  (g)  amount  paid  for  miscellaneous  expenses. 

7.  The  annual  gross  earnings  of  such  corporation, 
including  revenues  from  every  source,  showing  by  sep- 
arate items  amount  received  by  departments,  such  as 
amount  received  for  light,  amount  received  for  sewerage, 
for  power,  water,  gas,  amount  received  for  street  rail- 
way fares  and  tickets.  (Acts  1905,  p.  40,  Sec.  1.) 

Article  1183.  Same  Subject. — The  corporations  men- 
tioned in  Article  1182  shall  also  make  to  the  Secretary 
of  State,  upon  blanks  to  be  furnished  by  him,  reports 
as  to  the  price  charged  the  public  for  sewerage,  gas, 
water,  light,  power,  and  the  price  charged  per  passenger 
upon  street  railways,  and  if  any  such  corporations  have  con- 
tracts with  cities  or  towns  for  furnishing  water  or  light, 
then,  the  amount  of  such  charge.  (Id.,  Sec.  2.) 

Article  1184.  Reports  to  Be  Under  Oath,  Etc. — The 
reports  provided  for  in  Articles  1182  and  1183  shall  be 
under  oath,  and  shall  be  made  by  any  officer  of  the 
corporation  having  knowledge  of  the  facts,  or  its  general 
manager  or  superintendent.  (Id.,  Sec.  3.) 

Article  1185.  Copies  of  Reports  to  Be  Filed  With 
Mayor  and  With  County  Clerk,  Recorded,  Etc. — A  true 
copy  of  the  reports  required  by  the  provisions  of  this 
chapter,  sworn  to  as  provided,  shall  be  filed  annually,  on 
or  before  the  first  day  of  March  of  each  year,  with  the 
mayor  of  the  city  or  town  where  the  corporation  has  its 
principal  place  of  business;  and  there  shall  also  be  filed 
at  the  same  time  a  true  copy  of  said  reports  with  the 
clerk  of  the  county  court  of  the  county  in  which  such 
corporation  has  its  principal  place  of  business;  and  the 
same  shall  be,  by  said  clerk,  delivered  to  the  commis- 
sioners' court;  and  such  reports  shall  be  recorded  in  a 
properly  indexed  book,  to  be  kept  for  that  purpose,  and 
open  to  the  inspection  of  the  public  at  all  times.  (Id., 
Sec.  4.) 


36  LAW  OF  OIL  AND  NATURAL  GAS 

Article  1186.  Penalty. — Any  such  corporation  as  de- 
scribed in  Article  1182,  which  shall  for  thirty  days  wil- 
fully fail  or  refuse  to  file  the  reports  in  the  manner  pro- 
vided by  this  chapter,  shall  forfeit  and  pay  to  the  State 
one  hundred  dollars  for  each  and  every  day  during  which 
it  shall  continue  in  default;  which  shall  be  recovered  by 
suit  in  a  court  of  competent  jurisdiction  by  the  Attorney 
General  of  the  State  of  Texas.  (Id.,  Sec.  5.) 

NOTE. — For  reports  required  of  all  corporations  subject  to  the  pay- 
ment of  an  annual  franchise  tax,  see  post,  Act  of  April  7,  1913,  Laws. 
33d  Leg.,  Ch.  153,  p.  327. 

CHAPTER  VIII. 

LIABILITY  OF  STOCKHOLDERS  AND  DIRECTORS. 

Article  1198.  When  and  How  Stockholders  May  Be 
Made  Liable  on  Execution. — If  any  execution  shall  have 
been  issued  against  property  or  effects  of  a  corporation, 
except  a  railway  or  a  religious  or  charitable  corporation, 
and  there  cannot  be  found  any  property  whereon  to  levy 
such  execution,  then  the  execution  may  be  issued  against 
any  of  the  stockholders  to  an  extent  equal  to  the  amount 
of  stock  unpaid;  but  no  execution  shall  issue  against  any 
stockholders,  except  upon  an  order  of  the  court  in  which 
the  action,  suit  or  other  proceeding  shall  have  been 
brought  or  instituted,  made  upon  motion  in  open  court, 
after  a  reasonable  notice  in  writing  to  the  person  or 
persons  sought  to  be  charged;  and,  upon  such  motion, 
such  court  may  order  execution  to  issue  accordingly;  or 
the  plaintiff  in  execution  may  proceed  by  action  to  charge 
the  stockholders  with  the  amount  of  his  judgment,  in 
accordance  with  the  liability  of  the  stockholders.  P.  D., 
5960. 

Article  1199.  Secretary  Shall  Furnish  Names,  Etc., 
of  Stockholders  to  Plaintiff. — The  Secretary  or  other 
officer  having  charge  of  the  books  of  any  corporation, 
on  demand  of  the  plaintiff  in  any  execution  against 


LAW  OF  OIL  AND  NATURAL  GAS  37 

the  corporation,  his  agent  or  attorney,  shall  furnish 
such  plaintiff,  his  agent  or  attorney  with  the  names  and 
places  of  residence  of  the  stockholders  as  far  as  known, 
and  the  amount  of  stock  held  by  each,  as  shown  by  the 
books  of  the  corporation.  (P.  D.,  5961.) 

Article  1200.  Directors  Liable  for  Debts  of  Corporation, 
When  and  to  What  Extent. — If  the  directors  of  any  cor- 
poration shall  knowingly  declare  and  pay  any  dividend 
when  the  corporation  is  insolvent,  or  any  dividend  the 
payment  of  which  would  render  it  insolvent,  they  shall 
be  jointly  and  severally  liable  for  all  the  debts  of  the 
corporation  then  existing,  and  for  all  debts  of  the  corpor- 
ation which  thereafter,  during  the  time  such  directors 
respectively  remain  in  office,  shall  be  contracted.  The 
amount  for  which  they  shall  be  so  liable  shall  not  exceed 
the  amount  of  such  dividend ;  and  if  any  of  the  directors 
shall  be  absent  at  the  time  of  declaring  the  dividend,  or 
shall  object  thereto,  at  the  time  such  dividend  is  de- 
clared, and  shall  file  their  objections  in  writing  with 
the  secretary  or  other  officer  of  the  corporation  having 
charge  of  the  books,  they  shall  be  exempted  from  said 
liability.  (Acts  1874,  p.  120.  Acts  1871,  2  S.  S.,  p.  66. 
Acts  1893,  p.  123.  P.  D.,  5959.) 


CHAPTER  X. 

DISSOLUTION    OF    PRIVATE    CORPORATIONS. 

Article  1205.     Corporation  is  Dissolved,  How. — A  cor- 
poration is  dissolved: 

1.  By  expiration  of  the  time  limit  in  its  charter. 

2.  By  a  judgment  of  dissolution  rendered  by  a  court 
of  competent  jurisdiction. 

3.  Where  four-fifths  in  interest  of  all  the  stock  out- 
standing shall  vote  in  favor  of  a  dissolution  at  a  stock- 
holders' meeting  called  for  that  purpose  on  notice  signed 
by  a  majority  of  the  directors,  stating  time,   place  and 
object  of  the  meeting,  served  personally,  or  by  mail,  at 


38  LAW  OF  OIL  AND  NATURAL  GAS 

least  thirty  days  next  before  the  meeting.  If,  at  said 
meeting,  four-fifths  in  interest  of  all  the  stockholders  of 
said  company  shall  signify  their  consent  in  writing  to 
the  dissolution  of  the  corporation,  such  consent  in  writing, 
together  with  a  list  of  the  directors  and  officers  of  the 
company,  giving  the  postoffice  address  and  place  of  resi- 
dence of  each,  certified  by  the  president  and  secretary  and 
treasurer  as  true  and  correct  action  of  the  stockholders, 
shall  be  filed  with  the  Secretary  of  State;  or  when,  with- 
out a  stockholders'  meeting,  all  the  stockholders  of  the 
corporation  consent  in  writing  to  a  dissolution,  the  same 
shall  be  certified  to  as  above  and  filed  with  the  Secretary 
of  State.  When  any  such  certificate  as  above  mentioned 
is  filed  with  the  Secretary  of  State,  he  shall  issue  a  cer- 
tificate that  such  consent  has  been  filed  and  that  the 
corporation  is  dissolved;  and  said  officer  shall  so  note  on 
the  ledger  in  his  office.  (Acts  1907,  p.  311,  Sec.  4. 
P.  D.,  5968.) 

4.  A    corporation    is    dissolved    whenever,    under    any 
special  provision  of  law,  its  charter  is  forfeited  without 
judicial  ascertainment. 

5.  Where  a  corporation  created  under  this  title  or  a 
general  law  of  this  State  shall  fail  to  commence  active 
operations  within  three  years  after  filing  its  charter  with 
the   Secretary  of  State,  its  charter  is  hereby  forfeited, 
and  the  corporation  is  dissolved.     (P.  D.,  5969.) 

6.  Whenever  a  corporation  upon  proper  judicial  ascer- 
tainment is  found  to  be  insolvent. 

Article  1206.  Unless  Receiver  Appointed,  President, 
Etc.,  to  Be  Trustees,  and  Close  Business. — Upon  the  dis- 
solution of  any  corporation,  unless  a  receiver  is  appointed 
by  some  court  of  competent  jurisdiction,  the  president 
and  directors  or  managers  of  the  affairs  of  the  corpora- 
tion at  the  time  of  its  dissolution,  by  whatever  name  they 
may  be  known  in  law,  shall  be  trustees  of  the  creditors 
and  stockholders  of  such  corporation,  with  full  power 
to  settle  the  affairs,  collect  the  outstanding  debts,  and 
divide  the  moneys  and  other  property  among  the  stock- 
holders, after  paying  the  debts  due  and  owing  by  such  cor- 


LAW  OF  OIL  AND  NATURAL  GAS  39 

poration  at  the  time  of  its  dissolution,  as  far  as  such 
money  and  property  will  enable  them  after  paying  all 
just  and  reasonable  expenses;  and  to  this  end,  and  for 
this  purpose  they  may,  in  the  name  of  such  corporation, 
sell,  convey  and  transfer  all  real  and  personal  property 
belonging  to  such  company,  collect  all  debts,  compromise 
controversies,  maintain  or  defend  judicial  proceedings,  and 
to  exercise  the  full  power  and  authority  of  said  company 
over  such  assets  and  properties;  and  the  existence  of 
every  corporation  may  be  continued  for  three  years  after 
its  dissolution  from  whatever  cause  for  the  purpose  of 
enabling  those  charged  with  the  duty  to  settle  up  its 
affairs ;  and,  in  case  a  receiver  is  appointed  by  a  court  for 
this  purpose,  the  existence  of  such  corporation  may  be 
continued  by  the  court  so  long  as  in  its  discretion  it  is 
necessary  to  suitably  settle  up  the  affairs  of  such  cor- 
poration. (Id.,  Sec.  7.) 

Article  1207.  Trustees  Responsible  to  Creditors,  Etc., 
to  What  Extent. — The  trustees  mentioned  in  the  pre- 
ceding article  shall  be  severally  responsible  to  the  creditors 
and  stockholders  of  such  corporation  to  the  extent  of  its 
property  and  effects  that  shall  have  come  into  their  hands. 
(P.  D.,  5971.) 

Article  1208.  Liability  of  Stockholders  to  Creditors  and 
to  Each  Other. — If  any  corporation  created  under  this 
title  or  any  general  statute  of  this  State,  except  rail- 
way, or  charitable  or  religious  corporations,  be  dissolved, 
leaving  debts  unpaid,  suit  may  be  brought  against  any 
person  or  persons  who  were  stockholders  at  the  time  of 
such  dissolution,  without  joining  the  corporation  in  such 
suit;  and  if  judgment  be  rendered  and  execution  satisfied, 
the  defendant  or  defendants  may  sue  all  who  were  stock- 
holders at  the  time  of  dissolution  for  the  recovery  of 
the  portion  of  such  debt  for  which  they  were  liable;  and 
the  execution  upon  the  judgment  shall  direct  the  collection 
to  be  made  from  property  of  each  stockholder  respectively ; 
and  if  any  number  of  stockholders  defendants  in  the 
case  shall  not  have  property  enough  to  satisfy  his  or  their 
portion  of  the  execution,  then  the  amount  of  deficiency 


40  LAW  OF  OIL  AND  NATURAL  GAS 

shall  be  divided  equally  among  all  the  remaining  stock- 
holders, and  collections  made  accordingly,  deducting  from 
the  amount  a  sum  in  proportion  to  the  amount  of  stock 
owned  by  the  plaintiff  at  the  time  the  company  dis- 
solved. (P.  D.,  5972.) 

Article  1209.  Stockholder  May  Compel  Contribution. — 
If  any  stockholder  pay  more  than  his  due  proportion  of 
any  debt  of  the  corporation,  he  may  compel  contribution 
from  the  other  stockholders  by  action.  (P.  D.,  5973.) 

Article  1210.  Only  Liable  for  Unpaid  Stock. — No  stock- 
holder shall  be  liable  to  pay  debts  of  the  corporation  be- 
yond the  amount  unpaid  on  his  stock.  (P.  D.,  5974.) 

Article  1211.  Members  or  Officers  of  Defunct  Corpora- 
tion Not  to  Do  Business  Under  Old  Corporate  Name,  Etc. 
— When  any  charter  or  permit  heretofore  or  hereafter 
granted  under  the  laws  of  the  State  of  Texas  to  any  cor- 
poration to  do  business  in  said  State  shall  have  been  for- 
feited, it  shall  be  unlawful  for  any  persons  who  were 
members  or  officers  of  said  defunct  corporation  at  the 
time  of  such  forfeiture  to  do  business  in  Texas  under  the 
old  corporate  name  of  such  corporation,  or  to  use  the  same 
or  like  signs  or  advertisements  which  were  used  by  such 
corporation  before  such  forfeiture.  (Acts  1905,  p.  335.) 

CHAPTER  XXI. 

GAS  AND  WATER  CORPORATIONS. 

Article  1282.  Privileges  of  Such  Corporations. — Any 
gas  or  water  corporation  shall  have  full  power  to  manu- 
facture and  sell  and  to  furnish  such  quantities  of  water 
or  gas  as  may  be  required  by  the  city,  town  or  village 
where  located,  for  public  or  private  buildings,  or  for 
other  purposes;  and  such  corporation  shall  have  power 
to  lay  pipes,  mains  and  conductors  for  conducting  gas 
or  water  through  the  streets,  alleys,  lanes  and  squares 
in  such  city,  town  or  village,  with  the  consent  of  the  mu- 
nicipal authorities  thereof,  and  under  such  regulations 
as  they  may  prescribe.  (P.  D.,  5992.) 


LAW  OF  OIL  AND  NATURAL  GAS  41 

Article  1283.  May  Contract  with  Cities,  Etc. — The  mu- 
nicipal authorities  of  any  city,  town  or  village,  in  which 
any  gas,  light  or  water  corporation  shall  exist,  are  hereby 
authorized  to  contract  with  any  such  corporation  for  the 
lighting  or  supplying  with  water  the  streets,  alleys,  lots, 
squares  and  public  places  in  any  such  city,  town  or  village. 
(P.  D.,  5993.) 

/ 
CHAPTER   XXIV. 

OIL,  GAS,  SALT,  ETC.,  COMPANIES. 

Article  1303.  How  Corporation  May  be  Formed. — Any 
number  of  persons,  not  less  than  three,  may  organize 
themselves  into  a  corporation  for  the  purpose  of  storing, 
transporting,  buying  and  selling  of  oil  and  gas,  salt,  brine 
and  other  mineral  solutions  in  this  State.  (Acts  1899, 
p.  202,  Sec.  1.) 

-Article  1304.  Same  Subject. — The  manner  and  method 
of  organizing  such  corporations  shall  be  the  same  as  pro- 
vided by  law  for  the  organization  of  private  corporations 
in  Chapter  2  of  this  title,  and  the  provisions  of  this  chap- 
ter shall  apply  to  all  corporations  already  organized  for 
any  of  the  purposes  of  this  chapter.  (Id.,  Sec.  2.) 

Article  1305.  Powers  of  Corporation. — Such  corpora- 
tions shall  have  power  to  store  and  transport  oil  and  gas, 
brine  and  other  mineral  solutions,  and  to  make  reasonable 
charges  therefor;  to  buy,  sell  and  furnish  oil  and  gas  for 
light,  heat  and  other  purposes;  to  lay  down,  construct, 
maintain  and  operate  pipe  lines,  tubes,  tanks,  pump  sta- 
tions, connections,  fixtures,  storage  houses,  and  such  ma- 
chinery, apparatus,  devices  and  arrangements  as  may  be 
necessary  to  operate  such  pipes  and  pipe  lines  between 
different  points  in  this  State ;  to  own,  hold,  use  and  occupy 
such  lands,  rights  of  way,  easements,  franchises,  build- 
ings and  structures  as  may  be  necessary  to  the  purpose 
of  such  corporation.  (Id.,  Sec.  3.) 

NOTE. — The  powers  of  a  corporation  created  under  Article  1303  are 
further  enlarged  by  the  Act  of  March  6,  1915,  Laws,  34th  Leg.,  p.  82. 
The  Act  is  given  in  full,  pp.  43,  44,  post. 


42  LAW  OF  OIL  AND  NATURAL  GAS 

Article  1306.  Right  of  Condemnation. — Such  corpora- 
tion shall  have  the  right  and  power  to  enter  upon,  con- 
demn and  appropriate  the  lands,  rights  of  way,  ease- 
ments and  property  of  any  person  or  corporation,  and 
shall  have  the  right  to  lay  its  pipes  and  pipe  lines  across 
and  under  any  public  road  or  under  any  railroad,  railroad 
right  of  way,  street  railroad,  canal  or  stream  in  this  State, 
and  to  lay  its  pipes  and  pipe  lines  across  or  along  and 
under  any  street  or  alley  in  any  incorporated  city  or 
town  in  this  State,  with  the  consent  and  under  the  di- 
rection of  the  board  of  aldermen  or  city  council  of  such 
city  or  town.  The  manner  and  method  of  such  condem- 
nation shall  be  the  same  as  is  provided  by  law  in  the  case 
of  railroads;  provided,  that  such  pipe  or  pipe  lines  shall 
not  pass  through  or  under  any  cemetery,  church  or  col- 
lege, schoolhouse,  residence,  business  or  store  house,  or 
through  or  under  any  building  in  this  State,  except  by 
the  consent  of  the  owner  or  owners  thereof;  and  provided, 
further,  that  all  such  pipes  and  pipe  lines,  when  same  shall 
pass  through  or  over  the  cultivated  or  improved  lands  of 
another,  shall  be  well  buried  under  ground  at  least  twenty 
inches  under  the  surface,  and  such  surface  shall  be  prop- 
erly and  promptly  restored  by  such  corporation  unless 
otherwise  consented  to  by  the  owner  or  owners  of  such 
land;  provided,  further,  that  if  such  pipes  or  pipe  lines 
shall  be  laid  over  or  along  any  uncultivated  or  unimproved 
lands  of  another,  and  such  lands  shall  thereafter  become 
cultivated  or  improved,  such  pipes  or  pipe  lines  shall  be 
buried  by  said  corporation  as  hereinbefore  provided,  with- 
in a  reasonable  time  after  notice  by  the  owner  of  such 
lands,  or  his  agent,  to  said  corporation  or  any  agent  there- 
of; and  provided,  further,  that  whenever  such  pipes  or 
pipe  line  shall  cross  any  public  road  or  highway,  railroad, 
street  railroad,  or  street  or  alley,  the  said  pipes  and  pipe 
lines  shall  be  so  buried  and  covered  as  not  to  interfere 
with  the  use  and  occupancy  of  such  road,  highway,  street 
or  alley  by  the  public,  or  use  and  occupancy  of  such  rail- 
road or  street  railroad  by  the  owner  or  owners  thereof; 


LAW  OF  OIL  AND  NATURAL  GAS  43 

and  provided,  further,  that  such  pipe  lines  so  laid  shall  not 
exceed  eight  inches  in  diameter.     (Id.,  Sec.  4.) 

NOTE. — A  pipe  line  company  is  liable  for  damages  caused  by  oil 
escaping  from  its  pipes  and  contaminating  the  water  of  a  creek, 
whereby  cattle  drinking  therefrom  were  killed,  and  this  irrespective  of 
negligence  in  permitting  such  escape.  But  the  court  would  not  judi- 
cially recognize  that  petroleum  was  poisonous  and  liable  to  produce 
such  result.  Texas  Co.  vs.  Earles,  164  S.  W.,  28. 

Article  1307.  Right  to  Borrow  Money,  Issue  Stock, 
Mortgage  Franchises,  Etc. — Such  corporation  shall  have 
the  right  to  borrow  money,  to  issue  stock  and  preferred 
stock,  to  mortgage  its  franchises  and  property  to  secure 
the  payment  of  any  debt  contracted  for  any  of  the  pur- 
poses of  such  corporation,  and  shall  possess  all  the  rights 
and  powers  of  corporations  for  profit  in  this  State,  wher- 
ever the  same  may  be  applicable  to  corporations  of  this 
character.  (Id.,  Sec.  5.) 

Article  1308.  Discrimination  Unlawful. — It  shall  be 
unlawful  for  any  corporation  organized  under  this  chapter 
to  discriminate  against  any  person,  corporation,  firm,  as- 
sociation, or  place  in  the  charge  for  such  storage  or  trans- 
portation, or  in  the  service  rendered,  but  shall  receive, 
store  or  transfer  oil  or  gas  for  any  person,  corporation, 
firm  or  association  upon  equal  terms,  charges  and  condi- 
tions with  all  other  persons,  corporations,  firms,  or  asso- 
ciations for  like  service.  (Id.,  Sec.  6.) 

GENERAL  LAWS,  34TH  LEG.,  P.  82. 
S.  S.  B.  No.  78.]  CHAPTER  41. 

An  Act  providing  for  the  enlargement  of  the  powers  of  corporations 
organized  under  Chapter  24,  of  Title  25,  of  the  Revised  Civil  Statutes 
of  1911,  for  the  purpose  of  storing,  transporting,  buying  and  selling 
oil  and  gas,  salt,  brine  and  other  mineral  solutions  in  this  State, 
and  declaring  an  emergency. 

Be  it  enacted  by  the  Legislature  of  the  State  of  Texas: 

SECTION  1.  Corporations  heretofore  or  hereafter  organ- 
ized under  the  provisions  of  Chapter  XXIV  of  Title  25 


44  LAW  OF  OIL  AND  NATURAL  GAS 

of  the  Revised  Civil  Statutes  of  1911,  and  which  shall  file 
with  the  Secretary  of  State  a  duly  authorized  acceptance 
of  the  provisions  of  this  Act,  are  hereby  declared  to  have, 
in  addition  to  the  powers  enumerated  in  said  chapter,  the 
power  to  carry  on  the  business  therein  authorized  outside 
of  as  well  as  within  this  state;  to  own  and  operate  re- 
fineries, casing  and  treating  plants,  sales  offices,  ware- 
houses, docks,  ships,  tank  cars  and  vehicles  necessary  in 
the  conduct  of  their  business;  and  to  cause  the  formation 
of  corporations  outside  of  this  state,  not  exceeding  one 
in  any  state,  territory  or  foreign  country,  whose  purposes 
and  powers  exercised  shall  be  only  those  conferred  by  law 
upon  the  forming  or  holding  corporation  as  incorporated 
under  the  laws  of  Texas  and  own  and  hold  the  stock  of 
such  corporations  when  the  effect  of  such  formation  or 
stock  holding  is  not  substantially  to  lessen  competition  or 
otherwise  to  violate  laws  prohibiting  trusts  and  monopo- 
lies and  conspiracies  in  restraint  of  trade. 

SEC.  2.  The  present  condition  of  the  law  on  this  sub- 
ject and  the  importance  of  the  change  herein  contemplated 
creates  an  emergency  and  an  imperative  public  necessity 
that  the  constitutional  rule  requiring  bills  to  be  read  on 
three  several  days  in  each  house  be  and  the  same  is 
hereby  suspended,  and  that  this  Act  become  a  law  from 
and  after  its  passage,  and  it  is  so  enacted. 

[NOTE. — S.  S.  B.  No.  78  passed  Senate  by  vote  of  20 
yeas,  4  nays,  February  19,  1915.  Passed  House  by  vote 
of  88  yeas,  37  nays,  March  4,  1915.] 

Approved  March  6,  1915. 

Takes  effect  90  days  after  adjournment. 


LAW  OF  OIL  AND  NATURAL  GAS  45 


CORPORATIONS   FOR   GENERATING,    TRANSPORTING   AND 
SELLING  GAS,  ETC. 

(Act  of  March  25,  1911,  Laws,  32d  Leg.,  p.  228.) 

SECTION  1.  That  any  number  of  persons,  not  less  than 
three,  may  organize  themselves  into  a  corporation  for  the 
purpose  of  generating,  manufacturing,  transporting  and 
selling  gas,  electric  current  and  power  in  this  State. 

SEC.  2.  The  manner  and  method  of  organizing  such 
corporations  shall  be  the  same  as  provided  by  law  for  the 
organization  of  private  corporations  under  Chapter  2, 
Title  21,  of  the  Revised  Civil  Statutes  of  the  State. 

SEC.  3.  Such  corporation  shall  have  the  power  to  gen- 
erate, make  and  manufacture,  transport  and  sell  gas,  elec- 
tric current  and  power  to  individuals,  the  public  and  mu- 
nicipalities for  light,  heat,  power  and  other  purposes,  and 
to  make  reasonable  charges  therefor;  to  construct,  main- 
tain and  operate  power  plants  and  substations  and  such 
machinery,  apparatus,  pipes,  poles,  wires,  devices  and  ar- 
rangements as  may  be  necessary  to  operate  such  lines  at 
and  between  different  points  in  this  State;  to  own,  hold, 
and  use  such  lands,  rights  of  way,  easements,  franchises, 
buildings  and  structures  as  may  be  necessary  for  the  pur- 
pose of  such  corporation. 

SEC.  4.  Such  corporation  shall  have  the  right  and 
power  to  enter  upon,  condemn  and  appropriate  the  lands, 
rights  of  way,  easements  and  property  of  any  person  or 
corporation,  and  shall  have  the  right  to  erect  its  lines 
over  and  across  any  public  road,  railroad,  railroad  right 
of  way,  interurban  railroad,  street  railroad,  canal  or 
stream  in  this  State,  and  any  street  or  alley  of  any  incor- 
porated city  or  town  in  this  State,  with  the  consent  and 
under  the  direction  of  the  governing  board  of  such  city 
or  town.  The  manner  and  method  of  such  condemnation 
shall  be  the  same  as  is  provided  by  law  in  the  case  of 
railroads,  pipe  lines,  telephone  and  telegraph  lines;  pro- 
vided, that  such  lines  shall  be  constructed  upon  suitable 


46  LAW  OF  OIL  AND  NATURAL  GAS 

poles  in  the  most  approved  manner  and  maintained  at  a 
height  above  the  ground  at  least  twenty-two  (22)  feet; 
or  pipes  may  be  placed  under  the  ground  as  the  exigencies 
of  the  case  may  require. 

SEC.  5.  Such  corporation  shall  have  the  right  to  bor- 
row money,  to  issue  stock  and  preferred  stock,  to  mort- 
gage its  franchises  and  property  to  secure  the  payment 
of  any  debt  contracted  for  any  of  the  purposes  by  such 
corporation,  and  shall  possess  all  the  rights  and  powers  of 
corporations  for  profit  in  this  State,  wherever  the  same 
may  be  applicable  to  corporations  of  this  character. 

SEC.  6.  It  shall  be  unlawful  for  any  corporation  organ- 
ized under  this  act  to  discriminate  against  any  person, 
corporation,  firm,  association  or  place  in  the  charge  for 
such  gas,  electric  current  or  power,  or  in  the  service  ren- 
dered under  similar  and  like  circumstances.  (Acts  32nd 
Leg.,  p.  228.) 

NOTE. — It  is  held  by  the  Attorney  General,  that  "gas"  in  this  statute 
includes  natural  gas.  That  "it  was  the  intention  of  the  Legislature 
to  authorize  the  creation  of  a  single  corporation  with  the  triple  right 
to  produce  gas,  transport  it  through  the  country  from  the  point  of 
production  to  the  place  of  market,  and  then  sell  it  to  the  public." 
That  "the  liberation  of  natural  gas  from  the  earth"  is  to  produce  or 
"generate"  it,  and  is  included  in  the  powers  conferred  by  Section  2. 

The  opinion  also  suggests  a  form  for  the  purpose  clause  in  the 
charter  of  a  corporation  under  this  Act  which  it  would  be  well  to 
follow.  It  is  given  in  the  accompanying  forms,  No.  III.  See  report 
of  Attorney  General  for  years  1912-1914,  p.  287. 

[Rev.  Stats.,  1911,  Continued.] 
CHAPTER   XXVI. 

FOREIGN  CORPORATIONS. 

Article  1314.  Permit  to  Do  Business,  Etc.,  in  State 
Must  be  Obtained,  and  How. — Hereafter,  any  corporation 
for  pecuniary  profit,  except  as  hereinafter  provided,  or- 
ganized or  created  under  the  laws  of  any  other  State,  or  of 
any  territory,  or  of  any  foreign  government,  sovereignty 
or  municipality,  desiring  to  transact  business  in  this  State, 


LAW  OF  OIL  AND  NATURAL  GAS  47 

or  solicit  business  in  this  State,  or  establish  a  general  or 
special  office  in  this  State,  shall  be,  and  the  same  is  hereby, 
required  to  file  with  the  Secretary  of  State  a  duly  certi- 
fied copy  of  its  articles  of  incorporation;  and,  thereupon, 
the  Secretary  of  State  shall  issue  to  such  corporation  a 
permit  to  transact  business  in  this  State.  (Acts  1897, 
p.  167.) 

May  be  Limited  to  One  or  More  Purposes. — If  such  cor- 
poration is  created  for  more  than  one  purpose,  the  per- 
mit may  be  limited  to  one  or  more  purposes.  (Id.) 

Showing  as  to  Stock  by  Foreign  Corporations. — Pro- 
vided, that  foreign  corporations  obtaining  permits  to  do 
business  in  this  State  shall  show  to  the  satisfaction  of  the 
Secretary  of  State  that  at  least  one  hundred  thousand  dol- 
lars, in  cash,  of  their  authorized  capital  stock  has  been 
paid  in,  or  that  fifty  per  cent  of  their  authorized  capital 
stock  has  been  subscribed,  and  at  least  ten  per  cent  of  the 
authorized  capital  has  been  paid  in,  before  such  permit 
is  issued.  (Acts  1901,  pp.  18-19.) 

Article  1315.  Permit  to  Do  Business,  Affidavit  As  Con- 
dition of  Issuance;  Requisites  of. — As  a  condition  prece- 
dent to  the  issuance  by  the  Secretary  of  State  of  a  permit 
to  any  foreign  corporation,  authorizing  it  to  do  business 
in  this  State,  the  president,  vice-president,  secretary,  or 
treasurer,  or  two  of  the  directors  of  such  corporation, 
shall  make  and  subscribe  an  affidavit  in  writing  stating 
that  such  corporation  is  not  a  trust  or  organization  in 
restraint  of  trade  in  violation  of  the  laws  of  this  State, 
has  not,  within  twelve  months  next  preceding  the  making 
of  such  affidavit,  become  or  been  a  party  to  any  trust 
agreement  of  any  kind  or  character  whatsoever,  which 
would  constitute  a  violation  of  any  anti-trust  law  of  the 
State  existing  at  the  date  of  such  affidavit,  and  has  not, 
within  that  time,  entered  into,  or  been  in  anywise  a 
party  to,  any  combination  in  restraint  of  trade,  within 
the  United  States  of  America,  and  that  no  officer  of  such 
corporation  has,  within  the  knowledge  of  affiant,  within 
twelve  months  next  preceding  the  date  of  such  affidavit, 
made,  on  behalf  of  such  corporation  or  for  its  benefit  any 


48  LAW  OF  OIL  AND  NATURAL  GAS 

such  contract,  or  entered  into,  or  become  a  party  to,  any 
such  combination  in  restraint  of  trade.  Such  affidavit  in 
writing  shall  be  personally  subscribed  and  sworn  to  by 
such  affiant  or  affiants  before  some  officer  who  is  by  law 
duly  authorized  to  administer  oaths,  and  the  jurat  of  such 
officer  shall  be  attested  by  his  official  signature  and  seal 
of  office;  and  such  affidavit  in  writing  so  attested  shall 
be  filed  in  the  office  of  the  Secretary  of  State  before  the 
issuance  of  any  such  permit.  (Acts  1909,  S.  S.,  pp. 
267-8.  Id.) 

Article  1316.  Secretary  of  State  to  Require  Proof  in 
What  Case. — It  shall  be  the  duty  of  the  Secretary  of  State 
to  require  satisfactory  proof  as  to  the  amount  of  capital 
actually  invested  in  this  State  before  issuing  any  permit  to 
any  foreign  building  and  loan  company  to  do  business  in 
this  State.  (Id.,  p.  267.) 

Article  1317.  Rights  Under  Permit. — Such  corporation, 
on  obtaining  such  permit,  shall  have  and  enjoy  all  the 
rights  and  privileges  conferred  by  the  laws  of  this  State 
on  corporations  organized  under  the  laws  of  this  State. 
(Acts  1897,  p.  167.) 

Article  1317a.  Right  to  Purchase,  Hold,  Sell,  Mortgage, 
Etc.,  Real  and  Personal  Estate;  Provisions  as  to  Alienation. 
— Such  corporations,  under  such  permits,  shall  be  author- 
ized and  empowered  to  hold,  purchase,  sell,  mortgage  or 
otherwise  convey  such  real  estate  and  personal  estate 
as  the  purposes  of  such  corporation  may  require,  and 
also,  to  take,  hold,  and  convey  such  other  property,  real, 
personal  or  mixed,  as  may  be  requisite  for  such  corpora- 
tion to  acquire,  in  order  to  obtain  or  secure  the  payment 
of  any  indebtedness  or  liability  due,  or  which  may  become 
due,  or  belonging  to,  the  corporation;  provided,  that,  if 
such  corporation  so  obtaining  a  permit  to  do  business 
in  this  State,  shall  acquire  any  real  estate  under  the  pow- 
ers herein  conferred,  it  shall  alienate  all  real  property 
so  acquired  by  it  not  necessary  for  the  purposes  of  such 
corporation,  within  fifteen  years  from  the  time  of  acqui- 
sition, and  provided,  further,  that  such  corporation  shall 
alienate  all  real  estate  acquired  by  it  for  the  purposes 


LAW  OF  OIL  AND  NATURAL  GAS  49 

of  such  corporation,  within  fifteen  years  from  the  expira- 
tion of  the  time  for  which  the  permit  is  issued,  or,  if  such 
permit  be  renewed,  or  such  corporation  be  otherwise  au- 
thorized to  carry  on  business  in  this  State,  then  such  cor- 
poration shall  alienate  such  real  estate  within  fifteen  years 
after  the  expiration  of  the  time  for  which  such  permit 
is  extended,  or  it  is  so  authorized  to  carry  on  business  in 
this  State;  and  provided,  further,  that  if  such  corpora- 
tion shall  cease  to  carry  on  business  in  this  State,  that  it 
shall  alienate  all  such  real  estate  so  acquired  by  it,  within 
fifteen  years  after  the  time  it  shall  cease  to  carry  on  bus- 
iness in  this  State.  (Id.) 

Article  1318.  No  such  Corporation  Can  Maintain  Any 
Suit,  Unless. — No  such  corporation  can  maintain  any  suit 
or  action,  either  legal  or  equitable,  in  any  of  the  courts 
of  this  State  upon  any  demand,  whether  arising  out  of 
contract  or  tort,  unless  at  the  time  such  contract  was 
made,  or  tort  committed,  the  corporation  had  filed  its  ar- 
ticles of  incorporation  under  the  provisions  of  this  chap- 
ter in  the  office  of  the  Secretary  of  State  for  the  purpose 
of  procuring  its  permit.  (Id.) 

Article  1319.  Corporations  Exempted  from  Provisions 
Hereof. — The  provisions  of  this  chapter  shall  not  apply  to 
corporations  created  for  the  purpose  of  constructing,  build- 
ing, operating  or  maintaining  any  railway,  or  to  such  cor- 
porations as  are  required  by  law  to  procure  certificates  of 
authority  to  do  business  from  the  Commissioner  of  Insur- 
ance and  Banking.  (Id.) 

Article  1320.  Permit  to  Extend  for  Period  of  Ten 
¥ears. — No  permit  shall  be  issued  for  a  longer  period  than 
ten  years  from  the  date  of  filing  such  articles  of  incorpo- 
ration in  the  office  of  the  Secretary  of  State.  (Id.) 

Article  1321.  Evidence. — Either  the  original  permit  or 
certified  copies  thereof  by  the  Secretary  of  State  shall  be 
evidence  of  the  compliance  on  the  part  of  any  corporation 
with  the  terms  of  this  chapter.  A  certificate  of  the  Secre- 
tary of  State  to  the  effect  that  the  corporation  named 
therein  has  failed  to  file  in  his  office  its  articles  of  incor- 
poration shall  be  evidence  that  such  corporation  has  in  no 


50  LAW  OF  OIL  AND  NATURAL  GAS 

particular  complied  with  the  requirements  of  this  chap- 
ter.    (Id.) 

NOTE. — To  "transact  business"  in  the  State  does  not  imply  the  car- 
rying on  of  its  main  business  here.  A  single  and  isolated  transaction, 
such  as  the  erection  of  an  industrial  plant,  including  labor  and  ma- 
terials, is  distinguishable  from  the  mere  sale  by  the  foreign  corpora- 
tion of  the  machinery  used  and  set  up  therein.  The  latter  would 
constitute  interstate  commerce,  for  which  no  permit  would  be  neces- 
sary ;  the  former  a  transaction  of  business  for  which  a  permit  must 
be  obtained.  S.  E.  Smythe  Co.  vs.  Ft.  Worth  Glass  &  S.  Co.,  105 
Texas,  8,  142  S.  W.,  1157. 

The  State  may  prescribe  the  conditions  under  which  a  foreign  cor- 
poration may  do  business  in  the  State,  having  the  power  absolutely 
to  exclude  it;  and  it  may  tax  the  privilege.  Gaar,  Scott  &  Co.  vs. 
Shannon,  52  Texas  Civ.  App.,  634,  115  S.  W.,  361;  Cont.  Oil  Co.  vs. 
Van  Winkle  Gin  Co.,  131  S.  W.,  415.  But  the  statute  can  not  be  made 
to  apply  to  transactions  constituting  interstate  or  foreign  commerce. 
Miller  &  Co.  vs.  Goodman,  91  Texas,  41,  40  S.  W.,  718 ;  T.  &  P.  Ry.  Co. 
vs.  Davis,  93  Texas,  378,  54  S.  W.,  381;  DeWitt  vs.  Berger  Mfg.  Co., 
81  S.  W.,  334;  Geiser  Mfg.  Co.  vs.  Gray,  126  S.  W.,  610;  Allen  vs. 
Tyson-Jones  Buggy  Co.,  91  Texas,  22,  40  S.  W.,  393;  Lasater  vs.  Pur- 
cell  M.  etc.  Co.,  22  Texas  Civ.  App.,  33,  54  S.  W.,  425 ;  Pasteur  Vaccine 
Co  vs.  Burkey,  22  Texas  Civ.  App.,  232,  54  S.  W.,  804;  Gale  Mfg.  Co. 
vs.  Finkelstein,  22  Texas  Civ.  App.,  241,  r>4  S.  W.,  619.  Such  corpora- 
tions, without  permit,  may  sue  for  debts  or  for  the  recovery  of  prop- 
erty, provided  the  right  arose  otherwise  than  from  the  transaction 
in  the  State  of  business  which  was  not  interstate  commerce.  Security 
Co.  vs.  Panhandle  Co.,  93  Texas,  575,  57  S.  W.,  22 ;  Brown  vs.  Guaranty 
Sav.  L.  &  Inv.  Co.,  (sale  of  corporate  stock  and  loan  of  money  there- 
on) 102  S.  W.,  138;  Norton  vs.  Thomas  &  Sons,  93  S.  W.,  711;  Lake 
View  Land  Co.  vs.  San  Antonio  Trac.  Co.,  95  Texas,  252,  66  S.  W., 
766;  Mansur  etc.  Imp.  Co.  vs.  Beer,  19  Texas  Civ.  App.,  311,  45  S.  W., 
972;  Gale  Mfg.  Co.  vs.  Finkelstein,  22  Texas  Civ.  App.,  241,  54  S.  W., 
619. 

ACT  OF  APRIL  7,  1913. 

Corporations. — Requires  annual  reports  to  be  made  be- 
tween first  day  of  January  and  first  day  of  February. 

H.  B.  No.  578.  CHAPTER  153. 

An  Act  to  require  all  corporations  that  are  required   by  law  to  pay 

an  annual  franchise  tax  to  make  a  report  to  the  Secretary  of  State 

between    the    first    day    of    January    and    the    first    day    of    February, 


51 

and  prescribing  what  the  report  shall  contain ;  prescribing  penalties 
for  failure  to  make  such  report,  and  providing  such  reports  shall 
only  be  subject  to  inspection  by  parties  who  are  interested  di- 
rectly in  the  subject  miatter  of  such  reports,  and  declaring  an 
emergency. 

Be  it  enacted  by  the  Legislature  of  the  State  of  Texas: 

SECTION  1.  All  corporations  that  are  now  required  by 
law  to  pay  an  annual  franchise  tax,  shall,  between  the 
first  day  of  January  and  the  first  day  of  February  of  each 
and  every  year,  be  required  to  make  a  report  to  the  Sec- 
retary of  State,  on  blanks  furnished  by  him,  which  report 
shall  give  the  authorized  capital  stock  of  the  corporation, 
the  capital  stock  issued  and  outstanding,  the  surplus  and 
undivided  profits  of  the  corporation,  the  names  and  ad- 
dresses of  all  the  officers  and  directors  of  the  corporation, 
the  amount  of  mortgages,  bonded  or  other  indebtedness 
of  each  corporation,  and  the  amount  of  the  last  annual, 
semi-annual  or  quarterly  dividend.  If  the  capital  stock 
issued  and  outstanding  plus  the  surplus  and  undivided 
profits  shall  exceed  the  authorized  capital  stock,  the  fran- 
chise tax  shall  be  based  on  this  amount  instead  of  the  au- 
thorized capital,  but  if  it  shall  be  less,  then  the  franchise 
tax  shall  be  based  on  the  amount  of  capital  stock,  but  no 
corporation  shall  be  required  to  pay  a  greater  rate  of 
franchise  tax  by  reason  of  its  having  a  surplus  than  a  cor- 
poration that  has  no  surplus. 

SEC.  2.  Any  corporation  which  shall  fail  or  refuse  to 
make  the  report  as  provided  in  Section  1  hereof,  shall  be 
subject  to  a  fine  of  ten  dollars  for  each  and  every  day 
after  the  first  day  of  February  that  they  shall  fail  to 
make  such  report.  The  Attorney  General  of  the  State  is 
hereby  empowered  and  directed  to  bring  suit  against  such 
corporation  in  either  of  the  district  courts  of  Travis  county, 
in  the  name  of  the  State  of  Texas  for  the  collection  of 
such  penalties  that  may  be  due  by  reason  of  such  failure. 

SEC.  3.  The  reports  required  by  this  act  shall  be 
deemed  to  be  privileged  and  not  for  the  inspection  of  the 
general  public,  but  any  party  or  parties  who  are  in- 


52  LAW  OF  OIL  AND  NATURAL  GAS 

terested  in  the  subject  matter  of  any  report,  may,  upon 
valid  request  in  writing  made  to  the  Secretary  of  State, 
secure  a  copy  of  same. 

SEC.  4.  The  following  officers  of  each  and  every  cor- 
poration shall  be  deemed  competent  to  make  the  report 
required  by  this  act:  The  president,  vice-president,  secre- 
tary, treasurer  or  general  manager,  and  all  reports  pro- 
vided for  in  this  act  shall  be  signed  officially  and  sworn  to 
before  some  officer  authorized  by  law  to  administer  oaths. 

SEC.  5.  All  laws  and  parts  of  laws  in  conflict  with  this 
act  are  hereby  repealed,  but  where  this  act  is  not  in  con- 
flict with  any  existing  law,  it  shall  be  held  to  be  amenda- 
tory thereof.  (Acts  33rd  Leg.,  p.  327.) 

[Rev.  Stats.,  1911,  Continued.] 

Title  58. 
CHAPTER  I. 

FEES  OF  OFFICE. 
2.   SECRETARY  OF  STATE. 

Article  3837.  Fees  of  State  Department. — The  Secre- 
tary of  State,  besides  other  fees  that  may  be  prescribed 
by  law,  is  authorized  and  required  to  charge  for  the  use 
of  the  State  the  following  fees:  [Provisions  relating  to 
certain  classes  of  corporations  omitted.] 

For  each  and  every  charter,  amendment  or  supplement 
thereto,  of  a  private  corporation  created  for  any  other 
purpose,  intended  for  mutual  profit  or  benefit,  a  fee  of 
fifty  dollars  shall  be  paid  when  said  charter  is  filed ;  pro- 
vided, that,  if  the  authorized  capital  stock  of  said  corpo- 
ration shall  exceed  ten  thousand  dollars,  it  shall  be  re- 
quired to  pay  an  additional  fee  of  ten  dollars  for  each  ad- 
ditional ten  thousand  dollars  of  its  authorized  capital  stock, 
or  fractional  part  thereof,  after  the  first.  * 

For  each  foreign  corporation  obtaining  permit  to  do 
business  in  this  State  shall  pay  fees  as  follows:  Fifty 
dollars  for  the  first  ten  thousand  dollars  of  its  author- 


LAW  OF  OIL  AND  NATURAL  GAS  53 

ized  capital  stock,  and  ten  dollars  for  each  additional  ten 
thousand  dollars,  o;r  fractional  part  thereof;  provided, 
that  the  fee  required  to  be  paid  by  any  foreign  corpora- 
tion for  a  permit  to  engage  in  the  manufacture,  sale, 
rental,  lease  or  operation  of  all  kinds  of  cars,  or  to  en- 
gage in  conducting,  operating  or  managing  any  telegraph 
line  in  this  State,  shall  in  no  event  exceed  ten  thousand 
dollars;  provided,  however,  that  mutual  building  and  loan 
companies,  so  called,  whose  stock  is  not  permanent,  but 
withdrawable,  shall  pay  a  fee  of  fifty  dollars  for  the  first 
one  hundred  thousand  dollars,  or  a  fractional  part  thereof, 
of  its  authorized  capital  stock,  and  ten  dollars  for  each  ad- 
ditional one  hundred  thousand  dollars,  or  a  fractional  part 
thereof;  and  where  the  company  is  a  foreign  one,  then  the 
fee  shall  be  based  upon  the  capital  invested  in  the  State 
of  Texas.  (Acts  1907, 'S.  S.,  p.  500.  Acts  1905,  p.  135. 
Acts  1889,  p.  93.  Acts  1889,  p.  87.  Acts  1883,  p.  72. 
Acts  1909,  S.  S.,  p.  267.) 

Article  3838.  Minimum  Fees  in  Certain  Cases. — The 
minimum  fee  for  any  foreign  building  and  loan  company 
shall  be  two  hundred  and  fifty  dollars;  provided,  further, 
that  the  fee  required  to  be  paid  by  any  foreign  corpora- 
tion for  a  permit  to  do  the  business  of  loaning  money  in 
this  State  shall  in  no  event  exceed  one  thousand  dol- 
lars. (Id.) 

Article  3839.  Pending  Suit  Not  Affected. — Nothing  in 
this  chapter,  nor  in  Articles  1315  and  1316,  shall  in  any- 
wise affect  any  suit  now  pending  in  the  name,  or  in  behalf 
of,  the  State  of  Texas,  as  against  any  foreign  corpora- 
tion. (Id.) 

Article  3840.  Fees  Paid  in  Advance  to  Secretary  and 
by  Him  to  Treasury  Monthly. — All  fees  mentioned  in  Ar- 
ticles 3837  and  3838  shall  be  paid  in  advance  into  the 
office  of  the  Secretary  of  State,  and  shall  be  by  him  paid 
into  the  State  Treasury  monthly.  (Id.) 


54  LAW  OF  OIL  AND  NATURAL  GAS 

Title  93. 

MINES   AND    MINING. 
CHAPTER  I. 

Article  5904.  (3498a)  Reserved  Lands  Opened  to  Ex- 
ploration and  Purchase,  Etc. — All  public  school,  university, 
asylum  and  public  lands  specially  included  under  the  op- 
eration of  this  title,  all  the  lands  now  owned  by  the  State 
situated  within  the  reservation  known  as  the  "Pacific 
Reservation,"  which  were  taken  off  the  market  and  re- 
served from  sale  by  an  act  approved  January  22,  1883, 
containing  valuable  mineral  deposits,  are  hereby  reserved 
from  sale  or  other  disposition,  except  as  herein  provided, 
and  are  declared  free  and  open  to  exploration  and  pur- 
chase under  regulations  prescribed  by  law,  by  citizens 
of  the  United  States  and  those  who  have  declared  their 
intention  of  becoming  such.  (Act  1895,  p.  197.) 

Article  5905.  (3498c)  Mining  District  Created. — It 
shall  be  the  duty  of  the  Commissioner  of  the  General  Land 
Office  in  all  lands  designated  as  mineral  lands  to  unite 
a  suitable  number  of  mineral  locations  into  mining  dis- 
tricts, in  each  of  which  shall  be  a  surveyor,  who  must 
either  be  the  surveyor  of  the  district  or  county  or  a  reg- 
ular appointed  deputy  and  an  officer  qualified  to  admin- 
ister oaths.  (Id.) 

Article  5906.  (3498d)  Mining  Claims  Limited,  Etc. — 
A  mining  claim  upon  veins  or  lodes  of  quartz  or  other 
rocks  in  place  bearing  silver,  gold,  cinnabar,  lead,  tin, 
copper  and  other  valuable  metals,  excluding  deposits  of 
kaolin,  baryta,  salt,  marble,  fire  clay,,  iron  ore,  coal,  oil, 
natural  gas,  gypsum,  nitrates,  mineral  paints,  asbestos, 
marls,  natural  cement,  clays,  onyx,  mica,  precious  stones, 
or  any  other  non-metallic  mineral,  and  stone  valuable 
for  ornamental  or  building  purposes,  or  other  valuable 
building  material,  may  equal  but  shall  not  exceed  one 
thousand  five  hundred  feet  along  the  mine  or  vein  or  lode. 


LAW  OF  OIL  AND  NATURAL  GAS  55 

No  such  claim  shall  exceed  twenty-one  acres  in  total  area. 
The  end  lines  of  each  claim  shall  be  parallel  to  each  other, 
and  all  claims  shall  be  in  the  form  of  a  parallelogram  or 
square,  unless  such  form  is  prevented  by  adjoining  rights 
or  boundaries  of  the  section  in  which  the  claim  lies.  The 
locater  under  this  title  shall  be  entitled  to  the  use  of  all 
the  superficial  area  between  the  inclosing  lines  of  the 
claim,  and  to  all  minerals  thereon  and  between  the  side 
and  the  end  lines,  extending  downward  vertically,  until 
the  rights  secured  by  posting  are  forfeited  as  provided; 
and  in  all  conflicts  priority  of  location  shall  decide.  (Id.) 

Article  5907.  (3498e)  Locater  to  Post  Claim.— The 
locaters  of  any  mining  claim  shall  post  up  at  the  center 
of  one  of  the  end  lines  of  the  same  a  written  notice,  stat- 
ing the  name  of  the  location  and  of  the  claim  and  date 
of  posting,  and  describe  the  claim  by  giving  the  number 
of  feet  in  length  and  width  and  the  direction  the  claim 
lies  in  length  from  the  notice,  together  with  the  section, 
if  known,  and  the  county,  and  shall  place  stone  monuments 
at  the  four  corners  and  otherwise  describe  the  corners 
so  that  they  can  be  readily  found.  The  notice  shall  be 
placed  in  a  conspicuous  place  so  it  can  be  readily  seen. 
(Id.) 

Article  5908.  (3498f)  Application  for  Survey  of 
Claim,  Requisites  of. — The  locater  shall,  within  three 
months  after  the  date  of  posting  the  required  notice,  file 
with  the  county  surveyor  of  the  county  in  which  the  land, 
or  a  part  thereof,  is  situated  an  application  in  writing 
for  the  survey  of  the  claim,  giving  the  name  of  the  claim 
and  such  designation  of  its  boundaries  and  location  as  to 
enable  the  surveyor  to  identify  the  land.  The  application 
shall  be  accompanied  by  a  fee  of  twenty  dollars,  unless  its 
tender  is  waived,  and  also  with  an  affidavit  attached 
thereto  that  the  applicant  has  found  valuable  minerals, 
stating  the  kind,  on  the  claim,  also  the  date  of  the  first 
posting  of  the  notice  on  the  claim  by  the  applicant  and 
that  the  notice  has  not  been  post-dated  nor  changed  in  its 
date.  Upon  receiving  the  application  and  affidavit  and 
fee,  the  surveyor  shall  record  the  application  and  affida- 


56  LAW  OF  OIL  AND  NATURAL  GAS 

vit  and  shall  forthwith  proceed  to  survey  the  claim.  After 
the  field-notes  are  recorded  and  a  plat  of  the  survey  is 
made  by  the  surveyor,  he  shall  deliver  the  application 
and  affidavit,  together  with  the  field-notes  and  plat,  to  the 
applicant  or  his  agent,  who  shall  forward  same  to  the 
Commissioner  of  the  General  Land  Office  with  one  dollar 
as  a  filing  fee.  When  the  applicant  forwards  the  papers 
aforesaid  to  the  Commissioner,  he  shall  at  the  same  time 
forward  to  the  State  Treasurer  one-fifth  of  the  aggregate 
price  of  the  land  as  the  first  payment  thereon.  The  ap- 
plicant shall  also  file  in  the  Land  Office  with  his  other  pa- 
pers his  obligation  to  the  State  for  the  remaining  unpaid 
purchase  money,  binding  himself  to  pay  to  the  State  of 
Texas,  at  the  State  Treasury  in  Austin,  Texas,  one-fifth 
of  the  unpaid  purchase  price,  together  with  four  per  cent 
interest  annually  after  the  date  of  the  filing  of  said  pa- 
pers in  the  Land  Office,  and  until  the  entire  purchase  price 
and  interest  are  fully  paid.  The  papers  aforesaid  shall 
be  filed  in  the  Land  Office  within  sixty  days  from  the  date 
the  application  was  filed  with  the  county  surveyor,  and 
not  thereafter.  The  fee  of  twenty  dollars  shall  cover  all 
charges  by  the  surveyor  in  connection  with  any  one  claim. 
A  claim  filed  on  under  this  title  for  gold,  silver,  cinnabar, 
lead,  tin  or  copper,  zinc-  tungsten,  molybdenum  and  ura- 
nium, may  be  paid  out  in  full  at  any  time  within  five 
years  from  the  date  the  papers  were  filed  in  the  Land 
Office.  All  mineral  lands  shall  be  sold  at  such  price  as 
may  be  fixed  by  the  Land  Commissioner,  but  in  no  event 
shall  the  same  be  sold  at  a  price  less  than  twenty-five 
dollars  per  acre,  nor  until  he  has  ascertained  approxi- 
mately their  value,  provided,  that  no  person,  firm  or  cor- 
poration, or  association  of  persons  shall  be  permitted  to 
locate  or  file  on  more  than  five  claims  of  twenty-one  acres 
within  a  radius  of  five  miles.  This  article  shall  apply  only 
to  the  claims  filed  on  land  containing  the  minerals  herein 
named.  (Id.  Amended  Act  1905,  Laws  29th  Leg.,  p.  148.) 
Article  5909.  3498g.  Claimant  Must  Do  What  Pend- 
ing Patent. — Upon  the  failure  of  any  one  of  the  several 
owners  to  contribute  his  proportion  of  the  expenditure 


LAW  OF  OIL  AND  NATURAL  GAS  57 

required  in  this  title  within  the  necessary  time,  the  co- 
owner  or  co-owners  who  have  paid  the  fees,  or  interest  or 
principal,  may,  at  the  expiration  of  the  time  in  which  the 
payment  was  to  be  made  and  was  so  made  by  him,  give 
notice  in  writing  to  such  defaulting  co-owner,  or  give  such 
notice  by  publication  in  a  newspaper  published  in  the 
county  where  the  claim  is,  if  any,  if  none  in  such  county, 
then  in  the  newspaper  published  nearest  the  mining 
claim,  for  at  least  once  a  week  for  ninety  days.  If,  after 
such  personal  notice  in  writing,  or  by  publication,  such 
delinquent  shall  fail  or  refuse  to  contribute  his  propor- 
tion of  the  expenditure  required,  his  interest  in  the  claim 
shall  cease  beyond  the  amount  which  he  may  have  previ- 
ously expended,  thereon,  and  become  the  property  of  his 
co-owners  who  may  have  made  the  required  expenditures. 
An  affidavit  of  the  co-owners  of  the  facts,  accompanied 
with  the  notice  given,  shall,  when  recorded  in  the  proper 
county  surveyor's  office,  be  sufficient  evidence  of  such  de- 
linquency and  forfeiture  in  all  interest  in  such  claim.  If 
patent  shall  be  applied  for  on  such  claim,  it  shall  be  is- 
sued to  the  owners,  if  the  proper  evidence  of  forfeiture 
of  such  interest  be  filed  in  the  Land  Office.  This  article 
shall  apply  only  to  the  claims  filed  on  land  containing 
the  minerals  named  in  the  preceding  article.  (Id.  Amended 
Act  1905,  Laws  29th  Leg.,  p.  148.) 

Article  5910.  3498h.  Rights  Accruing  to  the  Claimant. 
— When  a  tunnel  is  run  for  the  development  of  a  vein 
or  lode,  or  for  the  discovery  of  mines,  the  owner  of  such 
tunnel  shall  have  the  right  of  possession  of  all  veins  or 
lodes  within  two  thousand  feet  of  the  surface  of  such 
claim  on  the  line  thereof,  not  previously  known  to  exist, 
discovered  in  such  tunnel  to  the  same  extent  as  if  dis- 
covered from  the  surface;  and  locations  on  the  line  of 
such  tunnel  of  veins  or  lodes  not  appearing  on  the  surface 
made  by  other  parties  after  the  commencement  of  the  tun- 
nel and  while  the  same  is  being  prosecuted  with  reasonable 
diligence  shall  be  invalid;  but  failure  to  prosecute  the 
work  in  the  tunnel  for  six  months  shall  be  considered  as 


58  LAW  OF  OIL  AND  NATURAL  GAS 

an  abandonment  of  the  right  of  all  undiscovered  veins  on 
the  line  of  said  tunnel.     (Acts  1895,  p.  197.) 

Article  5911.  (3498i.)  Conditions  Precedent  to  Issue  of 
Patent. — Whenever  the  owners  of  any  mining  claim  shall 
desire  a  patent,  they  shall,  within  five  years  after  the  filing 
of  the  application  for  survey,  file  their  application  for  a 
patent  upon  their  claim  with  the  Commissioner  of  the 
General  Land  Office,  accompanied  by  the  receipt  of  the 
State  Treasurer  showing  that  twenty-five  dollars  per  acre 
has  been  paid  by  the  applicant  for  patent  to  the  State 
Treasurer.  Whereupon  such  patent  shall  issue,  unless 
protest  is  filed  as  hereinafter  provided  for  in  Article 
5913.  (Id.) 

Article  5912.  (3498J)  Right  of  Purchase.— Within 
twelve  months  after  the  filing  of  the  affidavit  hereinafter 
provided  for,  any  person  or  association  of  persons,  qual- 
ified as  required  by  Article  5904,  shall  have  the  right  to 
purchase  and  obtain  patent  by  compliance  with  this  title 
of  any  of  the  lands  of  the  State  which  are  specified  or  in- 
cluded in  Article  5904,  containing  valuable  deposits  of 
kaolin,  baryta,  salt,  marble,  fire  clay,  iron  ore,  coal,  oil, 
natural  gas,  gypsum,  nitrates,  mineral  paints,  asbestos, 
marl,  natural  cement,  clay,  onyx,  mica,  precious  stones 
or  any  other  non-metallic  mineral  and  stones  valuable  for 
ornamental  or  building  purposes,  or  other  valuable  build- 
ing material,  in  legal  subdivisions,  in  quantity  not  exceed- 
ing one  section;  provided,  that  where  any  such  parties 
shall  have  heretofore  expended,  or  shall  hereafter  expend, 
five  thousand  dollars  in  developing  the  aforesaid  mineral 
resources  of  any  of  said  lands,  such  party  shall  have  the 
right  to  buy  one  additional  section  and  no  more,  and  to 
include  in  the  purchase  any  section,  or  part  thereof,  on 
which  the  work  may  have  been  done.  The  land  so  pur- 
chased may  be  in  different  sections,  and  all  embraced  in 
one  or  more  obligations,  not  to  exceed  the  quantity  stated. 
The  purchaser  shall  pay  not  less  than  fifteen  dollars  per 
acre  where  the  land  shall  be  situated  ten  miles  or  less  of 
any  railroad  in  operation,  and  not  less  than  ten  dollars 
per  acre  where  the  land  is  over  ten  miles  from  such  rail- 


LAW  OF  OIL  AND  NATURAL  GAS  59 

road,  one-tenth  of  the  purchase  money  to  be  paid  in  cash 
to  the  State  Treasurer  on  or  before  the  expiration  of  the 
twelve  months  aforesaid;  and  the  purchaser  shall  file  the 
Treasurer's  receipt  with  the  Commissioner  of  the  General 
Land  Office,  together  with  an  obligation  to  pay  the  State 
of  Texas  the  remainder  in  nine  equal  annual  installments, 
with  interest  at  four  per  cent  per  annum  from  date,  sub- 
ject to  forfeiture  as  in  other  cases;  and  all  said  lands 
are  reserved  from  sale  or  other  disposition  than  under 
this  title;  and  where  application  is  made  to  buy  any  of 
the  lands  herein  named,  except  under  this  title,  the  pur- 
chaser shall  swear  that  there  are  none  of  the  minerals 
named  in  this  title  on  said  lands,  so  far  as  he  knows, 
or  has  reason  to  believe,  or  does  believe;  provided,  fur- 
ther, that  this  article  shall  not  authorize  the  sale  of  lands 
containing  valuable  deposits  of  gold,  silver,  lead,  cinnabar, 
copper  or  other  valuable  metal;  provided,  further,  that 
any  person  desiring  to  acquire  any  lands  under  the  pro- 
visions of  this  article  shall  have  the  right  to  prospect 
said  land  for  a  period  of  twelve  months  before  making 
any  payment  thereon,  upon  condition  that  said  prospector 
shall  file  with  the  proper  surveyor  his  affidavit  in  writing, 
setting  forth  that  he  has  gone  upon  the  land  in  good  faith 
with  the  intention  of  purchasing  the  same  under  the  pro- 
visions of  this  article,  and  in  said  affidavit,  give  a  reason- 
able description  of  the  land.  After  the  filing  of  said 
affidavit,  the  said  surveyor  shall  immediately  forward 
same  to  the  Commissioner  of  the  General  Land  Office,  who 
shall  take  said  section  off  the  market  until  the  expiration 
of  said  twelve  months  after  the  filing  of  said  affidavit 
with  the  surveyor.  (Id.) 

NOTE. — The  application  to  purchase  mineral  lands  under  this  article 
must  point  out  with  reasonable  certainty  the  land  sought  to  be 
purchased.  Where  it  designated  parts  of  different  sections,  aggre- 
gating more  than  the  applicant  was  entitled  to  purchase,  and  applied 
for  "all  or  any  of  these  lands,"  the  application  was  properly  rejected. 
Brown  vs.  Kobison,  103  Texas,  551,  131  S.  W.,  401.  An  applicant  is 
entitled  by  compliance  with  this  Act,  making  known  to  the  Com- 
missioner that  the  lands  are  mineral  bearing,  to  purchase  them  as 


60  LAW  OF  OIL  AND  NATURAL  GAS 

such  under  the  law,  though  they  were  classified  as  agricultural  or 
grazing  lands.  The  Commissioner  could  determine  the  fact  that  they 
were  mineral  bearing  and  sell  them  as  such,  independent  of  the 
classification.  Colquitt-Tigner  Min.  Co.  vs.  Itogan,  95  Texas,  452,  68 
S.  W.,  154.  As  to  the  right  of  the  Commissioner  to  require  relinquish- 
ment  of  mineral  rights  from  one  applying  to  purchase  as  dry  grazing 
land  a  survey  so  classified,  see  Thaxton  vs.  Terrell,  99  Texas,  562 ; 
Schendell  vs.  Rogan,  94  Texas,  585.  As  to  purchase  as  grazing  land 
of  surveys  classified  as  mineral  bearing,  see,  Camp  vs.  Smith,  166 
S.  W.,  22. 

Article  5913.  (3498k)  Contest  of  Patent. — Any  per- 
son desiring  to  contest  the  issue  of  patent  may  do  so  by 
filing  with  the  Commissioner  of  the  General  Land  Office 
a  protest  setting  forth  the  grounds  of  objection  generally, 
and  that  protestant  has  an  interest  in  the  subject  matter ; 
which  protest  shall  also  state  that  the  same  is  presented 
in  good  faith  and  not  to  injure  or  delay  the  applicants, 
or  any  of  them,  and  the  same  shall  be  verified  by  affidavit. 
Whereupon  it  shall  be  the  duty  of  the  Commissioner  to 
withhold  patent  until  the  controversy  is  ended;  provided, 
that,  if  the  protestant  shall  not,  within  thirty  days  after 
filing  his  protest,  institute  suit  in  the  court  having  juris- 
diction thereof  in  the  county  where  the  claims  are  located, 
his  protest  shall  constitute  no  further  barrier  to  the  issu- 
ance of  patent.  A  certified  copy  of  the  petition,  or  a  cer- 
tificate of  the  clerk  of  the  court  where  suit  is  pending, 
shall  be  sufficient  evidence  to  the  Commissioner  of  the 
pendency  of  the  suit,  and  of  the  filing  of  said  suit.  When 
the  land  in  controversy  lies  partly  in  two  counties,  suit 
may  be  brought  in  either.  More  than  one  claim  shall 
not  be  embraced  in  the  same  patent  or  application.  The 
suits  here  provided  for  shall  be  entitled  to  precedence  of 
trial  on  the  docket.  (Id.) 

Article  5914.  (3492)  Location  on  Land  Disposed  of 
Since  April  14,  1883. — When  a  location  has  been  made 
and  land  disposed  of  by  the  State  since  the  passage  of 
the  Act  of  1883,  for  disposition  of  minerals  on  the  land 
embraced  in  Article  5904  of  this  title,  if  such  location  was 
made  subsequent  to  the  disposition  by  the  State  of  such 
lands,  and  the  locator  or  his  assignees  have  not  abandoned 


LAW  OF  OIL  AND  NATURAL  GAS  61 

said  claim,  but  are  working  it  in  good  faith,  the  locator 
and  his  assignees  shall  nevertheless  be  entitled  to  the  use 
of  the  mineral  and  to  the  superficial  area  as  in  other 
cases;  and,  if  the  case  is  such  that  the  fee  in  the  land 
can  not  pass  by  patent,  a  patent  may  issue  to  all  the 
minerals  in  the  claims,  and  shall  be  license  from  the  State 
to  enter  upon  and  work  said  claim  and  extract  the  mineral 
therefrom.  In  cases  provided  for  in  this  article  when  the 
fee  does  not  pass,  the  price  shall  be  twenty  dollars  per 
acre,  and  the  locator,  or  his  assignee,  shall  in  addition 
pay  to  the  owner  of  the  land  in  fee  the  fair  value  of  the 
land  so  taken  up  by  his  claim,  and  roads  and  fences  neces- 
sary to  give  him  ingress  and  egress  thereto,  and  be  liable 
for  any  damages  which  may  result  to  the  owner  of  the 
land  in  fee.  All  other  provisions  of  this  title  shall  apply 
to  said  location.  (Id.) 

Article  5915.  (3498)  Forfeiture  of  Claims. — If  the  ap- 
plication and  affidavit  provided  for  in  Article  5908  are  not 
filed  with  the  proper  county  surveyor  within  ninety  days 
from  the  date  of  the  first  posting,  and  if  the  application, 
affidavit,  field-notes,  filing  fee  and  obligation  are  not  filed 
in  the  Land  Office,  or  the  first  payment  is  not  paid  to  the 
State  Treasurer,  within  sixty  days  as  required  in  Ar- 
ticle 5908,  the  file  and  claim  thereunder  shall  be  void.  If 
any  part  of  an  annual  interest,  or  any  part  of  an  annual 
payment  of  principal,  remains  unpaid  for  thirty  days 
after  it  becomes  due  on  any  claim,  such  claims  shall  be 
subject  to  forfeiture  by  the  Commissioner  of  the  Gen- 
eral Land  Office  by  an  indorsement  on  the  obligation,  "For- 
feited," signed  officially  by  him,  and  thereupon  all  pay- 
ments shall  also  be  forfeited  to  the  fund  to  which  the 
land  originally  belonged.  All  forfeited  claims  may  be 
reinstated  upon  written  request  of  one  or  more  owners 
filed  in  the  Land  Office  and  payment  of  all  interest  and 
principal  due;  provided,  no  rights  of  another  has  not  in- 
tervened at  date  of  filing  said  request  in  the  Land  Office. 
One  interested  in  a  claim  at  the  time  it  was  forfeited 
shall  not  be  eligible  to  re-locate  or  re-file  upon  the  same 
land  for  himself  or  on  behalf  of  any  other  person,  and 


62  LAW  OF  OIL  AND  NATURAL  GAS 

any  such  location  or  attempt  to  locate  by  such  person  shall 
be  wholly  void.  Whenever  any  land  theretofore  covered 
by  a  forfeited  claim  shall  be  re-located,  the  locator  or  lo- 
cators and  each  of  them  shall  make  an  affidavit  that  the 
location  is  made  without  any  contract  or  agreement  or 
understanding  of  any  kind ;  that  none  of  the  parties  there- 
tofore owning  an  interest  in  the  forfeited  claim  before  the 
re-location  have  or  is  to  have  any  interest  in  the  same 
under  the  new  location.  In  all  other  cases  where  an  affi- 
davit is  required  by  this  title,  it  may  be  made  by  one 
or  more  of  the  parties  cognizant  of  the  facts.  This  ar- 
ticle shall  apply  only  to  claims  on  land  containing  the 
minerals  named  in  Article  5908.  (Id.  Amended  Act  1905, 
Laws  29th  Leg.,  p.  148.) 

Article  5916.  (3498n)  Applicant  to  Make  Oath. — 
Whenever  an  application  shall  be  made  to  buy  or  obtain 
title  to  any  of  the  lands  embraced  in  Article  5914,  5904, 
except  where  the  application  is  made  under  this  title,  the 
applicant  shall  make  oath  that  there  is  not,  to  the  best  of 
his  knowledge  and  belief,  any  of  the  minerals  embraced  in 
this  title  thereon;  and,  when  the  Commissioner  has  any 
doubt  in  relation  to  the  matter,  he  shall  forbear  action 
until  he  is  satisfied.  Any  such  sale  or  disposition  of  said 
lands  shall  be  understood  to  be,  with  the  reservation  of  the 
minerals  thereon;  to  be  subject  to  location  as  herein  pro- 
vided. (Acts  1895,  p.  197.) 

NOTE. — A  purchaser  of  lands  classed  as  agricultural  or  grazing1,  and 
not  known  to  contain  minerals,  is  not  required  to  file  this  affidavit. 
Schendell  vs.  Eogan,  94  Texas,  585. 

Article  5917.  (3498o)  Placer  Claims  Subject  to  Loca- 
tion.— Claims  usually  called  placers,  including  all  forms 
of  metallic  deposits,  excepting  veins  of  quartz  or  rock  in 
place,  shall  be  subject  to  entry  and  patent  under  like  cir- 
cumstances and  conditions  and  upon  similar  proceedings 
as  are  provided  for  vein  or  lode  claims.  All  placer  claims 
located  shall  conform  as  near  as  practicable  with  exist- 
ing surveys  and  their  subdivisions;  and  no  such  location 
shall  include  more  than  forty  acres  for  each  individual 


LAW  OF  OIL  AND  NATURAL  GAS  63 

claimant,  and  shall  not  exceed  three  hundred  and  twenty 
acres  for  any  association  of  persons.  The  price  which 
shall  be  paid  for  such  placer  shall  not  be  less  than  ten 
dollars  per  acre,  together  with  all  costs  of  proceedings  as 
before  provided.  (Id.) 

Article  5918.  (3498p)  Application  May  Embrace  Non- 
Adjacent  Non-Mineral  Land. — Where  non-mineral  land  not 
contiguous  to  the  vein  or  lode  is  issued  by  the  prospector 
of  such  vein  or  lode  for  mining  or  milling  purposes,  such 
non-adjacent  surface  ground  may  be  embraced  and  in- 
cluded in  an  application  for  a  patent  for  such  vein  or  lode, 
and  the  same  may  be  patented  therewith,  subject  to  the 
same  preliminary  requirements  as  to  survey  and  notice  as 
are  applicable  to  veins  or  lodes;  but  no  location  of  such 
non-adjacent  lands  shall  exceed  ten  acres,  and  payment 
for  the  same  must  be  made  at  the  same  rate  as  fixed  by 
this  title  for  the  superficies  of  the  lode.  The  owner  of  a 
quartz  mill  or  reduction  works,  not  owning  a  mine  in  con- 
nection therewith,  may  also  receive  a  patent  for  a  mill 
site,  as  provided  in  this  section.  (Id.) 

Article  5919.  (3498q)  Purposes  for  Which  Timber 
May  be  Felled. — Any  owner  or  worker  of  mining  claim 
under  this  title  is  authorized  to  fell  and  remove  for  build- 
ing and  mining  purposes  any  timber  or  any  tree  growing 
or  being  upon  unoccupied  lands  as  described  in  Article 
5914,  5904,  said  lands  being  mineral  and  subject  to  entry 
only  as  mineral  lands,  under  such  rules  and  regulations  as 
may  be  prescribed  for  the  protection  of  timber  and  under- 
growth upon  such  lands  and  for  other  purposes.  (Id.) 

Article  5920.  (3498r)  Vested  Rights  Not  Affected.— 
Nothing  in  this  title  shall  ever  be  so  construed  as  to  either 
destroy,  invalidate  or  impair  any  valid  claim,  right  or 
interest  existing  in,  to  or  concerning  any  lands  whatever 
at  the  passage  of  this  title,  of  any  pre-emptor,  purchaser, 
actual  settler,  locator  or  other  person  whatsoever.  (Id.) 

Article  5921.  (3498s)  Proceeds  Appropriated. — The 
net  proceeds  of  all  sales  of  mining  lands  under  the  pro- 
visions of  this  title  shall  inure  to  the  benefit  of  the  State 
and  the  respective  funds  for  which  the  lands  mentioned 


64  LAW  OF  OIL  AND  NATURAL  GAS 

in  Article  5914,  5904  are  set  apart  under  the  constitution 
and  laws  of  the  State;  and  it  shall  be  the  duty  of  the 
Comptroller,  State  Treasurer  and  Commissioner  of  the 
General  Land  Office  to  see  to  it  and  have  said  proceeds 
so  paid  rightly  placed  to  the  credit  of  the  particular  and 
proper  fund. 

Article  5922.  (3498t)  Surveyors  to  Administer  Oaths. 
— For  the  purpose  of  effectually  carrying  out  the  provis- 
ions of  this  title,  all  county  or  district  surveyors  are 
hereby  specially  authorized  and  empowered  to  administer 
oaths,  take  affidavits  and  make  certificates  thereof. 

NOTE. — The  foregoing-  articles  of  the  Revised  Statutes,  5904-5922, 
constitute  Chapter  1  of  Title  93,  relating  to  Mines  and  Mining.  Chap- 
ter 2  of  this  title  relates  to  the  duties  of  the  State  Mining  Board  and 
to  coal  mining  regulations,  and  is  omitted  as  inapplicable  to  mining 
operations  for  petroleum  and  gas,  which  are  conducted  by  boring. 
The  regulation  of  such  wells  is  by  Title  134,  on  the  subject  "Wells — 
Oil,  Gas,  and  Water,"  Articles  7847-7854,  post. 

Title  126. 

% 

TAXATION. 

CHAPTER  III. 

FRANCHISE  TAX. 

Article  7393.  Tax  to  Be  Paid  by  Domestic  Corpora- 
tions.— Except  as  herein  provided,  each  and  every  private 
domestic  corporation  heretofore  chartered,  or  that  may 
hereafter  be  chartered,  under  the  laws  of  this  State,  shall 
on  or  before  the  first  day  of  May  of  each  year,  pay  in  ad- 
vance to  the  Secretary  of  State  a  franchise  tax  for  the 
year  following,  which  shall  be  computed  as  follows,  viz: 
Fifty  cents  on  each  one  thousand  dollars,  or  fractional 
part  thereof,  of  the  authorized  capital  stock  of  such  cor- 
poration, unless  the  total  amount  of  capital  stock  of  such 
corporation  issued  and  outstanding,  plus  its  surplus  and 
undivided  profits,  shall  exceed  its  authorized  capital  stock; 


LAW  OF  OIL  AND  NATURAL  GAS  65 

and  in  that  event  the  franchise  tax  of  such  corporation 
for  the  year  following  shall  be  fifty  cents  on  each  one 
thousand  dollars  of  capital  stock  of  such  corporation  is- 
sued and  outstanding,  plus  its  surplus  and  undivided  prof- 
its; provided,  that  such  franchise  tax  shall  not  in  any  case 
be  less  than  ten  dollars;  provided,  that,  where  the  au- 
thorized capital  exceeds  one  million  dollars,  such  franchise 
tax  shall  be  fifty  cents  for  each  one  thousand  dollars  up 
to  and  including  one  million  dollars,  and  for  each  addi- 
tional one  thousand  dollars,  in  excess  of  one  million  dollars, 
it  shall  be  twenty -five  cents.  (Act  1907,  p.  503,  Sec.  1.) 

Article  7395.  Only  Part  of  Tax  to  Be  Paid,  When.— 
Whenever  a  private  domestic  corporation  is  chartered  in 
this  State,  and  whenever  a  foreign  corporation  is  author- 
ized to  do  business  in  this  State,  and  such  corporation 
shall  be  required  to  pay  in  advance  to  the  Secretary  of 
State,  as  its  franchise  tax  from  that  time  down  to  and 
including  the  thirtieth  day  of  April  next  following,  only 
such  proportionate  part  of  its  annual  franchise  tax,  as 
hereinabove  prescribed,  as  the  period  of  time  between  the 
date  of  filing  of  its  articles  of  incorporation  or  the  issu- 
ance of  its  permit  to  do  business,  as  the  case  may  be^and 
on  the  first  day  of  May  next  following,  bears  to  a  calendar 
year.  (Id.,  Sec.  3.) 

Article  7396.  Certain  Affidavits  May  Be  Required. — 
For  the  purpose  of  determining  the  amount  of  the  first 
franchise  tax  payment  required  by  this  chapter  of  any 
domestic  corporation  which  may  be  hereafter  chartered, 
or  of  any  foreign  corporation  which  may  hereafter  apply 
for  a  permit  to  do  business  within  this  State,  and  also  for 
the  purpose  of  determining  the  correctness  of  any  report 
which  is  provided  for  in  this  chapter,  the  Secretary  of 
State  may,  whenever  he  may  deem  it  necessary  or  proper 
to  protect  the  interests  of  the  State,  require  any  one  or 
more  of  the  officers  of  such  corporations  to  make  and  file 
in  the  office  of  the  Secretary  of  State  an  affidavit  or  affi- 
davits in  writing,  which  shall  be  subscribed  by  such  officer, 
and  by  him  sworn  to  before  some  officer  who  is  by  law 
duly  authorized  to  administer  oaths,  and  verified  by  his 


66  LAW  OF  OIL  AND  NATURAL  GAS 

seal  of  office,  setting  forth  fully  the  facts  concerning  the 
amount  of  the  surplus  and  undivided  profits,  respectively, 
if  any,  of  such  domestic  or  foreign  corporation;  and  until 
the  Secretary  of  State  shall  be  fully  satisfied  as  to  the 
amount  of  such  surplus  and  undivided  profits,  respectively, 
if  any,  he  shall  not  file  the  articles  of  incorporation  of 
such  proposed  domestic  corporation,  or  issue  such  permit, 
or  accept  such  franchise  tax.  (Id.,  Sec.  4.) 

Article  7397.  Reports  to  Be  Filed,  Etc. — For  the  pur- 
pose of  ascertaining  and  determining  the  amount  of  any 
annual  franchise  tax  prescribed  by  this  chapter,  except- 
ing only  the  first  tax  to  be  paid  by  any  domestic  corpo- 
ration which  may  hereafter  be  chartered,  or  of  any  for- 
eign corporation  which  may  hereafter  be  authorized  to 
do  business  in  this  State,  the  president,  vice-president, 
general  manager,  secretary,  treasurer  and  superintendent 
of  each  and  every  domestic  or  foreign  corporation  em- 
braced within  the  provisions  of  this  chapter,  shall  annu- 
ally and  between  the  first  and  tenth  days  of  March,  and 
also  whenever  called  upon  by  the  Secretary  of  State  to 
do  so,  report  to  the  Secretary  of  State,  in  writing,  and 
under  oath,  as  required  by  the  preceding  article,  the  total 
amounts  of  the  capital  stock  issued  and  outstanding,  and 
the  surplus  and  undivided  profits,  respectively,  if  any, 
of  such  corporation  on  the  first  day  of  March  next  pre- 
ceding; and  the  Secretary  of  State  may  ascertain  such 
facts  from  other  sources;  and,  if  the  true  aggregate  of 
such  amounts  shall  exceed  the  authorized  capital  stock  of 
such  corporation  as  disclosed  by  its  then  current  original 
or  amended  articles  of  incorporation,  the  amount  of  its 
annual  franchise  tax  for  the  year  beginning  the  first  day 
of  May  next  thereafter,  shall  be  thereon  collected  and 
paid;  otherwise  its  annual  franchise  tax  shall  be  calcu- 
lated and  paid  upon  the  amount  of  its  authorized  capital 
stock  as  shown  by  its  aforesaid  original  or  amended  ar- 
ticles of  incorporation.  The  making  and  filing  by  any 
one  of  such  officers  of  such  corporation  of  the  record  re- 
quired by  this  article  shall  relieve  the  other  officers  of 
such  corporation  from  the  duty  of  making  any  report 


LAW  OF  OIL  AND  NATURAL  GAS  67 

required  by  this  article,  except  such  report  or  reports  as 
may  be  required  by  the  Secretary  of  State.  (Id.,  Sec.  5.) 
Article  7398.  Supplemental  Tax  to  Be  Paid  When  Cap- 
ital Increased. — In  the  event  of  increase  in  the  authorized 
capital  stock  of  any  domestic  or  foreign  corporation,  it 
shall  also  pay  in  advance  a  supplemental  franchise  tax 
thereon  for  the  remainder  of  the  year  down  to  and  in- 
cluding the  thirtieth  day  of  April  next  thereafter,  the 
amount  of  which  shall  be  determined  as  is  provided  in 
Article  7395  in  case  of  the  first  franchise  tax  payment 
to  be  made  under  this  chapter  by  a  domestic  corporation 
which  may  be  hereafter  authorized  to  do  business  within 
this  State.  (Id.,  Sec.  6.) 

NOTE. — The  following  articles  of  the  Revised  Statutes  upon  this 
subject  are  omitted :  Arts.  7394,  7401,  relating-  to  foreign  corporations. 
Arts.  7397,  7400,  7404,  7'405,  relating  to  forfeitures  and  penalties  for 
non-payment.  Art.  7403,  applying  only  to  certain  specified  corpora- 
tions. Art.  7406,  relating  to  corporations  in  process  of  liquidation. 

Title   134. 

WELLS — OIL,  GAS. 

Article  7847.  Wells,  How  Cased. — The  owner  or  oper- 
ator of  any  well  being  constructed  for  the  production  of 
petroleum  oil,  natural  gas,  or  mineral  water,  shall,  before 
drilling  into  the  oil  or  gas  bearing  rock,  in  case  [incase] 
such  well  with  good  and  sufficient  wrought  iron  or  steel 
casing,  in  such  manner  as  shall  exclude  all  surface  or  fresh 
water  from  the  lower  part  of  such  well  from  penetrating 
the  oil  or  gas  bearing  rock.  Should  any  well  be  drilled 
through  the  first  into  a  lower  oil  or  gas  bearing  rock,  the 
same  shall  be  cased  in  such  manner  as  will  exclude  all 
fresh  water  above  the  last  oil  or  gas  bearing  rock  pene- 
trated. (Acts  1899,  p.  68.) 

Article  7848.  Abandoned  Wells  to  be  Filled. — The  own- 
er or  operator  of  any  well  constructed  for  either  or  any 
of  the  purposes  named  in  the  preceding  article,  when 
about  to  abandon  or  cease  operating  the  same,  and  before 


68  LAW  OF  OIL  AND  NATURAL  GAS 

drawing  the  casing  therefrom,  shall  securely  fill  such  well 
with  rock,  sediment  or  with  mortar,  composed  of  two  parts 
sand  and  one  part  cement  or  other  suitable  material  to 
the  depth  of  two  hundred  feet  above  the  top  of  the  first 
oil  or  gas  bearing  rock,  and  also  in  such  manner  as  shall 
prevent  the  gas  and  oil  from  escaping  therefrom.  If  the 
owner  or  operator  of  any  such  well  shall  fail  to  or  shall 
inefficiently  comply  with  the  provisions  of  this  article,  then 
the  owner  of  the  land  upon  which  the  well  is  situated 
shall  forthwith  comply  therewith.  If  all  the  persons  here- 
inbefore named  shall  fail  to  or  inefficiently  fill  such  well 
in  the  manner  hereinbefore  described,  then  it  shall  be 
lawful  for  any  person,  after  written  demand  therefor  to 
any  of  said  persons,  to  enter  the  premises  where  such  well 
is  situated,  take  possession  thereof  and  fully  comply  with 
the  provisions  of  this  article.  The  reasonable  cost  and 
expense  thereof  shall  forthwith  be  paid  by  the  owner  or 
operator  of  the  well,  and  on  his  default  by  the  owner 
of  the  land.  The  amount  of  such  reasonable  cost  and  ex- 
pense shall  forthwith  be  a  lien  upon  the  fixtures  and  ma- 
chinery and  leasehold  interest  of  the  owner  and  operator 
of  said  well,  as  upon  the  title  and  interest  of  the  land 
owner  in  the  land  upon  which  said  well  is  situated,  and 
may  be  recovered  and  enforced  against  said  owner  or  op- 
erator, in  the  order  named,  in  any  court  of  competent 
jurisdiction.  (Id.  Sec.  2.) 

Article  7849.  Gas' to  be  Confined  Until  Utilized. — Any 
person,  co-partnership,  or  corporation  in  possession,  either 
as  owner,  lessee,  agent  or  manager,  of  any  well  producing 
natural  gas,  in  order  to  prevent  the  said  gas  from  wast- 
ing by  escape,  shall,  within  ten  days  after  penetrating  the 
gas  bearing  rock  in  any  well  hereafter  drilled,  shut  in 
and  confine  the  gas  in  said  well  until  and  during  such 
time  as  the  gas  therein  shall  be  utilized  for  light  or  fuel 
or  power;  provided,  that  this  shall  not  apply  to  any  well 
that  is  operated  for  oil.  (Id.  Sec.  3.) 

Article  7850.  Limitation  on  Use  of  Gas  for  Illuminat- 
ing Purposes. — It  shall  be  unlawful  for  any  person,  co- 
partnership or  corporation  to  use  natural  gas  for  illumi- 


LAW  OF  OIL  AND  NATURAL  GAS  69 

nating  purposes  by  what  are  known  as  flambeau  lights; 
but  nothing  herein  shall  prohibit  the  use  of  "Jumbo"  bur- 
ners, or  any  other  burners  consuming  no  more  gas  than 
such  "Jumbo"  burners,  but  the  person,  co-partnership,  or 
corporation,  consuming  such  gas  and  using  such  burners 
in  the  open  air,  shall  inclose  the  same  in  glass  globes  or 
lamps;  and  any  one  using  such  gas  in  the  open  air,  or  in 
and  around  derricks,  shall  turn  off  said  gas  not  later  than 
eight  o'clock  in  the  morning  of  each  day  such  lights  are 
burning  or  used,  and  shall  not  turn  on  or  relight  the 
same  between  the  hours  of  eight  o'clock  a.  m.  and  five 
o'clock  p.  m.  (Id.  Sec.  4.) 

Article  7851.  Penalties;  Disposition  of  Fines. — Any 
person,  copartnership,  or  corporation  violating  any  of  the 
provisions  of  this  chapter  shall  be  liable  to  a  penalty  of 
one  hundred  dollars,  to  be  recovered  with  the  cost  of  suit 
in  a  civil  action,  in  the  name  of  the  State  of  Texas,  in 
any  court  of  competent  jurisdiction  in  the  county  in  which 
the  act  shall  be  committed  or  omitted.  Such  suit  may  be 
brought  at  the  instance  of  any  resident  of  the  State  of 
Texas,  without  security  or  liability  of  cost.  The  amount 
of  said  penalty  when  collected  shall  be  paid,  one-half  into 
the  school  fund  of  the  county  in  which  said  suit  is  brought 
and  one-half  to  said  person  at  whose  instance  said  suit 
shall  be  brought.  (Id.  Sec.  5.) 

Article  7852.  Duties  of  Persons  Where  Salt  Water  Ap- 
pears in  Wells. — If  any  person  or  persons  in  this  State, 
boring  any  well  or  wells  for  oil,  gas  or  mineral  waters, 
shall  pierce  any  cap-rock  or  other  geological  formation 
in  such  manner  as  to  cause  a  flow  of  salt  water  or  fresh 
water  injurious  to  any  oil  well  or  wells  already  bored,  or 
to  any  oil  or  gas  deposits,  and  which  shall  or  may  prob- 
ably result  in  the  injury  of  such  oil  or  gas  field,  or  to 
such  oil  or  gas  wells  already  bored,  such  person  or  per- 
sons shall,  if  the  flow  of  water  can  not  be  cased  off,  im- 
mediately abandon  all  work  upon  such  well  and  plug  and 
fill  up  the  same  in  such  manner  and  with  such  materials 
as  will  stop  the  flow  of  said  water;  and  it  shall  be  unlaw- 
ful for  any  well  owner,  or  person  boring  any  such  well,  to 


70  LAW  OF  OIL  AND  NATURAL  GAS 

remove  the  casing  from  the  well  drilled  until  the  flow  of 
water  shall  be  stopped,  either  by  casing  off  or  plugging 
such  well.  The  provisions  of  this  article  shall  only  apply 
where  such  cap-rock  or  other  formation  is  pierced  at  a 
depth  below  the  horizon  at  which  oil  or  gas  has  already 
been  discovered.  If  any  well  shall  be  abandoned  from 
any  cause,  the  same  shall  be  securely  plugged  and  sealed. 
(Acts  1905,  p.  228,  Sec.  7.) 

Article  7853.  District  Courts;  Jurisdiction  and  Super- 
vision.; May  Appoint  Superintendent,  Make  Regulations, 
Etc. — The  district  courts  of  each  county  in  this  State,  and 
the  judges  thereof  in  vacation,  shall  have  jurisdiction  to 
enforce  the  provisions  of  this  chapter;  and  they  are  here- 
by authorized  and  empowered,  either  in  term  time  or  in 
vacation,  upon  the  application  of  any  person  or  persons 
interested  either  as  land  owners,  lessees  of  land  or  as  well 
owners,  in  any  oil  or  gas  field  in  this  State,  in  its  discre- 
tion, to  appoint  some  suitable  person  or  persons  as  super- 
intendent of  such  oil  or  gas  field,  and  to  require  of  such 
person  a  bond,  the  amount  thereof  to  be  fixed  by  the 
court,  conditioned  that  such  superintendent  shall  obey  and 
carry  out  the  rules,  regulations,  orders  and  decrees  which 
may  be  from  time  to  time  prescribed  and  entered  by  said 
court  for  the  protection  of  such  oil  or  gas  field,  and  the 
persons  employed  therein,  from  fire  or  other  causes  likely 
to  be  injurious  to  the  properties  and  operations  in  such 
field,  and  with  power  and  authority  to  enforce,  under  the 
orders  of  said  court,  a  strict  compliance  by  all  persons 
with  all  the  requirements  of  the  laws  of  this  State  gov- 
erning the  boring  and  operation  of  oil  or  gas  wells  in  oil 
or  gas  fields;  and  said  courts  are  authorized  and  empow- 
ered to  make  from  time  to  time  such  rules  and  regula- 
tions for  the  government  of  such  oil  and  gas  fields  and 
the  operation  carried  on  therein,  and  the  handling  of  the 
oil  or  gas  products,  as  may,  in  the  discretion  of  the  court, 
be  necessary  or  requisite  for  the  protection  of  the  several 
interests  in  said  oil  and  gas  field  from  fire  or  other  prob- 
able injurious  cause.  The  court  may  require  of  the  per- 
sons who  apply  for  the  appointment  of  a  superintendent 


LAW  OF  OIL  AND  NATURAL  GAS  71 

of  any  oil  or  gas  field  or  other  protective  order  proper 
security  for  the  payment  of  any  and  all  costs  of  court, 
including  the  salaries  of  any  superintendents,  or  necessary 
employes  under  him,  as  well  as  for  such  other  costs  and 
expense  as  may  be  necessary  to  be  expended  in  the  pro- 
tection of  such  oil  or  gas  field  and  enforcement  of  the  or- 
ders of  said  courts.  (Id.  Sec.  8.) 

Article  7854.  Suits  and  Penalties,  How  Brought. — Any 
person  or  persons,  co-partnership,  corporation,  or  associa- 
tion of  persons,  violating  any  of  the  provisions  of  this 
chapter,  or  who  shall  fail  or  refuse  to  obey  any  order  or 
decree,  rule  or  regulation,  made  or  promulgated  by  said 
district  courts  requiring  any  act  to  be  done  or  omitted, 
shall  be  liable  to  penalty  of  not  less  than  five  hundred 
dollars  nor  more  than  five  thousand  dollars,  to  be  ascer- 
tained by  the  verdict  of  the  jury  of  the  court  trying  the 
cause;  said  sum  to  be  recovered  with  the  costs  of  suit  in 
a  civil  action  brought  for  that  purpose  in  the  name  of 
the  State  of  Texas,  in  any  court  of  competent  jurisdic- 
tion, in  the  county  in  which  the  act  complained  of  shall 
have  been  committed  or  omitted;  and  such  suit  may  be 
brought  at  the  instance  of  any  resident  of  the  State  of 
Texas,  without  security  or  liability  for  costs;  and  the 
amount  of  said  penalty  when  collected  shall  be  paid  into 
the  school  fund  of  the  county  in  which  said  suit  is  brought. 
Such  suit  may  be  brought  at  the  instance  of  either  the  dis- 
trict attorney  or  the  county  attorney  of  the  county  in 
which  the  act  was  committed  or  omitted.  (Id.  Sec.  9.) 


72  LAW  OF  OIL  AND  NATURAL  GAS 


THE  BLUE  SKY  LAW. 

CORPORATIONS — REGULATING  THE  SALE  OF  THE  STOCK 

OF  SAME. 

H.  B.  No.  9.]  CHAPTER  32. 

An  Act  to  regulate  and  supervise  the  sale  and  purchase,  in  this  State, 
of  stocks  of  private,  foreign  and  domestic  corporations  organized 
for  profit,  which  propose  to  increase  their  capital  stock ;  and  to 
regulate  and  supervise  the  sale  and  purchase,  in  this  State,  of  stocks 
of  private,  foreign  and  domestic  corporations  being  organized  and 
hereafter  organized  or  proposed  to  be  organized,  for  profit;  and  to 
regulate  and  supervise  the  offering  or  contracting  for  sale  and 
purchase  of  such  stock  of  such  corporation  or  proposed  corporation, 
and  to  fix  commission  and  promotion  fees  allowed  to  be  charged  ; 
and  providing  for  service  of  process,  examination  fees,  and  exempting 
certain  corporations  from  the  effect  of  this  Act ;  providing  penalty 
for  the  violation  of  the  provisions  of  this  Act,  and  declaring  an 
emergency. 

Be  it  enacted  by  the  Legislature  of  the  State  of  Texas: 

SECTION  1.  Every  private  corporation,  foreign  or  domes- 
tic, organized  for  profit,  which  is  now  attempting  or  shall 
hereafter  attempt  to  increase  its  capital  stock,  and  every 
proposed  corporation  attempted  to  be  organized  which 
shall,  directly  or  indirectly,  through  itself,  its  agents  or 
employes,  or  through  any  person  or  association  of  persons, 
holding  companies,  sales  companies  or  otherwise,  or 
through  any  other  agents,  sell  or  contract  to  sell  any 
stock  of  such  corporation  or  proposed  corporation,  upon 
which  sale  or  proposed  sale  or  contract  of  sale  any  part 
of  the  proceeds  derived  or  to  be  derived  therefrom  are 
used  or  to  be  used,  directly  or  indirectly,  for  the  payment 
of  any  commission,  promotion,  organization  fee  or  other 
expenses  incident,  directly  or  indirectly,  to  the  sale  of  its 
shares  of  stock,  except  attorney's  fees,  charter  fees,  fran- 
chise tax,  permit  fees  and  stationery  and  supplies,  shall 
be  subject  to  the  provisions  of  this  act. 


LAW  OF  OIL  AND  NATURAL  GAS  73 

SEC.  2.  This  act  shall  also  apply  to  any  mining,  oil  or 
gas  corporation  increasing  its  stock  or  proposed  mining, 
oil  or  gas  corporation  attempting  to  sell  stock  in  which 
any  land  or  mineral  or  thing  of  value  is  to  be  procured 
from,  in  or  under  such  land  that  has  been  or  is  to  be 
placed  as  an  asset  with  or  in  the  corporation  or  proposed 
corporation,  whether  any  promotion  fee  is  charged  or  not, 
and  to  any  townsite  corporation  or  proposed  townsite  cor- 
poration. 

SEC.  3.  Before  offering  for  sale  or  contracting  to  sell, 
directly  or  indirectly,  any  stock  of  such  proposed  corpo- 
ration, or  such  increased  stock  of  any  existing  corporation, 
or  before  selling  any  stock  in  any  townsite  corporation 
as  provided  in  Section  2,  such  corporation,  or  those  pro- 
moting or  having  charge  of  the  sale  of  stock  of  any  pro- 
posed corporation,  shall  file,  under  oath,  in  the  office  of 
the  Secretary  of  State,  where,  under  the  law,  a  charter 
would  be  filed  in  his  department,  or  in  the  office  of  the 
Commissioner  of  Insurance  and  Banking,  where,  under 
the  law,  a  charter  would  be  filed  in  his  department,  to- 
gether with  a  filing  fee  of  twenty  dollars,  the  following 
documents:  A  statement  showing  in  full  detail  the  plan 
upon  which  the  corporation  proposes  to  increase  its  cap- 
ital stock  or  upon  which  the  promoters  or  those  having 
charge  of  the  sale  of  stock  of  any  proposed  corporation 
proposes  to  sell  its  stock  and  organize  the  corporation, 
together  with  a  copy  of  all  the  forms  of  contracts,  stock 
(or  deeds,  if  the  same  shall  come  under  Section  2  hereof) 
to  be  used  by  the  corporation  or  promoters,  or  those  hav- 
ing charge  of  the  sale  of  stocks  of  any  proposed  corpora- 
tion in  connection  with  such  stock  sales.  The  statement 
shall  further  show  the  name,  location  and  domicile  of  such 
corporation,  and  the  names  of  its  officers  or  proposed  offi- 
cers, if  any,  promoters,  and  the  addresses  of  all  the 
parties;  the  amount  of  capital  stock  of  any  corporation 
already  organized,  the  proposed  increase,  or  the  proposed 
capital  stock  of  the  corporation  to  be  organized,  and  the 
price  at  which  the  stock  is  proposed  to  be  sold;  and  the 
price  at  which  the  stock  is  proposed  to  be  sold  shall  not 


74  LAW  OF  OIL  AND  NATURAL  GAS 

be  changed  without  filing  with  the  secretary  or  commis- 
sioner, as  the  case  may  be,  a  statement  of  such  change, 
which  shall  be  subject  to  his  approval.  Any  such  corpo- 
ration promoters  of  such  proposed  corporation  shall 
furnish  the  secretary  or  commissioner  such  other  infor- 
mation as  may  be  necessary  or  proper  concerning  the  sale 
of  its  stock. 

If  it  shall  be  a  corporation  organized  under  the  laws  of 
any  other  jurisdiction,  it  shall  file  with  the  secretary  or 
commissioner  a  copy  of  its  charter,  and  such  other  evi- 
dence of  its  authority  as  the  secretary  or  commissioner 
may  require. 

Said  statement  shall  also  show  the  commission,  promo- 
tion fee  and  other  estimated  incidental  expenses  proposed 
to  be  charged  for  the  organization  of  such  proposed  cor- 
poration, or  the  increase  in  the  capital  stock  of  any  cor- 
poration already  organized,  and  how  the  commissions  or 
fees  are  to  be  paid. 

If  the  corporation  or  proposed  corporation  comes  under 
Section  2  hereof,  the  officers  of  the  corporation,  or  the 
promoters  of  the  proposed  corporation  shall  state  the  facts 
upon  which  they  base  their  estimate  of  the  actual  value 
of  the  property  which  is  to  become  an  asset  of  the  cor- 
poration, and  the  secretary  or  commissioner  shall  require 
such  proof  as  he  may  deem  proper  to  establish  the  actual 
value  of  the  property. 

The  secretary  or  commissioner  shall  have  the  right  to 
employ  such  experts  as  he  may  deem  necessary,  and  the 
experts  shall  be  employed  at  the  expense  of  the  corpora- 
tion or  promoters  of  a  proposed  corporation. 

No  corporation  proposed  to  be  organized  for  the  pur- 
pose of  buying  and  selling  town  sites  and  town  lots  shall 
hereafter  be  granted  a  charter  by  the  Secretary  of  State, 
or  if  a  foreign  corporation  shall  not  be  granted  a  permit 
to  do  business  in  the  State  of  Texas  unless  the  incorpo- 
rators  of  said  proposed  corporation  or  officer  of  such  for- 
eign corporation  shall  file  with  the  Secretary  of  State 
each  and  every  document,  contract  and  all  papers  referred 
to  in  Section  3  of  this  act,  as  well  as  a  general  statement 


LAW  OF  OIL  AND  NATURAL  GAS  75 

of  the  plan  of  its  proposed  townsite,  and  a  general  state- 
ment of  its  methods  of  advertising  same,  together  with 
a  sample  copy  of  its  advertising  literature,  and  no  charter 
shall  be  granted  any  corporation  unless  after  the  compli- 
ance with  the  provisions  of  this  act  and  in  the  judgment 
of  the  Secretary  of  State,  such  business  of  any  proposed 
townsite  corporation  will  be  honestly  and  fairly  conducted 
both  to  the  corporation  and  to  the  public.  And  each  and 
every  corporation  in  this  State  now  existing  or  hereafter 
organized  desiring  to  engage  in  the  sale  of  townsite  lots 
or  sites  shall,  prior  to  such  sale,  file  with  the  Secretary 
of  State  a  general  plan  of  said  proposed  lots  to  be  sold, 
as  well  as  a  copy  of  any  and  all  proposed  contracts  to  be 
made  with  the  public  in  the  sale  thereof,  and  a  general 
statement  of  the  literature  proposed  to  be  issued,  and  all 
matter  referred  to  in  Section  3  hereof,  and  if  in  the 
judgment  of  the  Secretary  of  State  said  sale  will  be  con- 
ducted both  honestly  and  fairly  to  the  corporation  and  to 
the  public,  a  permit  to  conduct  said  sale  shall  be  granted. 
This  provision  shall  not  be  construed  to  authorize  the 
creation  of  any  corporation  for  any  purpose  not  now  au- 
thorized by  the  laws  of  this  State. 

SEC.  4.  The  secretary  or  commissioner,  upon  the  re- 
ceipt of  the  information  as  provided  for  in  Section  3,  shall 
grant  or  refuse  such  permit. 

If  the  secretary  or  commissioner  shall  decide  that  the 
sale  of  stock  will  be  fairly  and  honestly  conducted,  both 
to  the  corporation  and  to  the  public,  such  permit  shall  be 
granted,  provided  that  the  commissions,  promotions  and 
other  incidental  expenses,  exclusive  of  the  exempted  ex- 
penses mentioned  in  Section  1  of  this  act  shall  not  be  more 
than  fifteen  (15)  per  cent  of  the  price  at  which  such  stock 
is  to  be  sold  as  shown  by  the  application  or  amended  ap- 
plication. 

Provided,  that  where  any  proposed  corporation  has  al- 
ready sold  its  stock,  or  a  part  thereof,  or  any  part  thereof 
has  been  subscribed  at  the  time  this  act  shall  take  effect, 
this  act  shall  not  affect  stock  previously  sold  or  subscribed 
nor  any  contracts  made  in  reference  to  same;  but  if  any 


76  LAW  OF  OIL  AND  NATURAL  GAS 

of  the  stock  of  said  proposed  corporation  remains  unsold 
or  unsubscribed,  said  corporation  shall,  nevertheless,  be 
entitled  to  a  permit  upon  complying  with  the  other  condi- 
tions of  this  act,  including  the  future  sale  or  subscription 
of  any  of  its  stock. 

The  commission  or  promotion  fee  shall  be  paid  to  the 
agent  or  promoter  as  the  stock  is  sold  by  him  and  paid  for 
by  the  purchaser.  The  stock  shall  be  considered  as  paid 
for  when  paid  for  in  cash,  property  or  labor. 

No  permit  shall  be  granted  unless  there  shall  appear 
upon  the  subscription  lists  and  contracts  of  such  corpo- 
ration or  proposed  corporation,  in  bold  type,  the  amount 
of  the  commissions,  promotion  fees  and  other  estimated 
expenses  incident  to  the  sale  of  such  stock,  and  the  in- 
terest which  the  officer,  agent,  employe  or  promoter  sell- 
ing or  contracting  to  sell  such  stock  has  in  such  sale; 
nor  shall  such  permit  be  granted  until  the  applicants 
therefor  have  entered  into  a  bond  for  not  less  than  one 
thousand  dollars  ($1000)  nor  more  than  one  hundred 
thousand  dollars  ($100,000),  the  same  to  be  fixed  by  the 
secretary  or  commissioner  at  not  more  than  ten  per  cent 
of  the  stock  proposed  to  be  issued.  The  said  bond  shall 
be  payable  to  the  secretary  or  commissioner,  as  the  case 
may  be,  and  his  successor  in  office,  conditioned  that  the 
facts  set  forth  in  the  application  for  such  permit,  and 
the  proof  and  statements  offered  to  such  secretary  or 
commissioner,  upon  which  the  application  is  based,  are 
true,  and  that  they  will  comply  with  the  provisions  of  this 
act  in  the  sale  of  the  stock  of  such  corporation  or  proposed 
corporation.  Said  bond  may  be  made  with  individual 
sureties  or  a  surety  company  authorized  to  do  business  in 
the  State  of  Texas,  and  the  bond  shall  be  approved  by  the 
secretary  or  commissioner. 

SEC.  5.  If  a  permit  shall  be  refused  by  the  secretary 
or  commissioner  the  parties  applying  therefor  may  bring 
suit  in  the  district  court  of  Travis  county,  Texas,  to  re- 
quire said  secretary  or  commissioner  to  issue  such  permit. 

SEC.  6.  Any  person  who  shall  be  induced  to  purchase 
any  stock  of  any  corporation  or  proposed  corporation  by 


LAW  OF  OIL  AND  NATURAL  GAS  77 

the  officers,  agents,  employes,  promoters  or  trustees,  by 
reason  of  any  misrepresentation  of  any  material  fact  con- 
cerning such  stock,  such  person  or  persons  shall  have  the 
right  to  bring  suit  upon  the  bond  above  provided  for,  and 
such  bond  shall  be  subject  to,  and  security  for,  such  person 
so  purchasing  the  stock,  provided  that  such  person  shall 
not  be  entitled  to  recover  more  than  the  money  paid,  or 
the  actual  value  of  the  property  given,  or  the  labor  per- 
formed, in  exchange  for  such  stock,  with  legal  interest 
from  the  date  of  the  payment  or  the  performance  of  the 
services,  or  the  transfer  of  the  property. 

One  or  more  recoveries  upon  such  bond  shall  not  vitiate 
the  same,  but  it  shall  remain  in  full  force  and  effect,  but 
no  recoveries  upon  such  bond  shall  ever  exceed  the  full 
amount  of  same,  and  upon  suits  being  filed  in  excess  of 
the  amount  of  same,  the  secretary  or  commissioner  may 
require  a  new  bond,  and  if  the  same  is  not  given  within 
thirty  days,  he  may  cancel  the  permit  herein  provided  for. 

Whenever  any  permit  has  been  issued,  the  corporation 
or  persons  receiving  the  same  shall  file  a  list  of  the  names 
of  their  or  its  authorized  officers,  agents  and  employes, 
and  the  postoffice  address  of  each;  and,  in  case  of  the 
change  of  any  of  its  officers,  agents  or  employes,  it  shall 
file  a  list  of  such  changes  with  the  secretary  or  com- 
missioner. 

SEC.  7.  All  moneys  or  other  things  of  value  collected 
by  such  corporation  or  the  promoters  of  a  proposed  cor- 
poration, for  the  sale  of  its  stock,  or  contract  for  the  sale 
of  its  stock,  shall  be  deposited  by  said  corporation  to  its 
credit,  or  by  the  promoters  of  a  proposed  corporation,  to 
the  credit  of  its  proposed  officers  or  trustees,  with  the  ex- 
ception of  the  amount  allowed  for  commissions,  promotion 
fees  and  other  incidental  expenses,  with  a  bank,  bank  and 
trust  company  or  trust  company  incorporated  under  the 
laws  of  this  State,  or  of  the  United  States. 

SEC.  8.  All  such  corporations,  and  the  organizers  or 
trustees  of  proposed  corporations  shall  keep  a  set  of  books, 
which  shall  show  the  amount  of  money,  or  other  things 
of  value  received  by  such  corporation  or  proposed  cor- 


78  LAW  OF  OIL  AND  NATURAL  GAS 

poration,  from  the  sale  of  its  stock,  or  from  contracts  of 
sale  of  its  stock,  and  such  books  shall  show  the  number 
and  amounts  of  stock  sold  or  contracted'  to  be  sold,  by 
whom  sold,  and  to  whom  sold,  or  contracted  to  be  sold, 
and  the  postoffice  address  of  each.  Said  books  shall  at 
all  times  be  open  for  inspection  by  the  secretary  or  com- 
missioner, or  his  duly  authorized  agent. 

SEC.  9.  Whenever  the  secretary  or  commissioner  shall 
have  information  that  any  corporation,  or  the  promoters 
of  the  proposed  corporation,  its  officers,  agents  or  em- 
ployes, are  not  complying  with  the  terms  of  this  act  in 
the  sale  of  its  stock  they  shall  notify  such  corporation,  or 
the  officers,  agents  or  employes  or  the  promoters  of  the 
proposed  corporation  to  appear,  within  twenty  days,  and 
show  cause  why  such  permit  should  not  be  canceled,  and 
after  the  hearing  such  secretary  or  commissioner  shall 
have  the  right  to  cancel  such  permit  if  the  proof  shall 
show  that  such  corporation  or  proposed  corporation,  or 
its  officers,  agents  or  employes  are  not  complying  with 
the  terms  of  this  act,  but  the  parties  or  corporation  hold- 
ing such  permit  shall  have  the  right  to  bring  suit,  in 
the  district  court  of  Travis  County,  Texas,  against  the  sec- 
retary or  commissioner,  to  reinstate  such  permit  to  sell 
stock. 

SEC.  10.  No  permit  to  sell  stock  shall  ever  be  issued 
to  any  foreign  corporation  which  has  not  at  the  time  of 
making  application  for  permit  at  least  fifty  per  cent  of 
its  capital  stock  subscribed  and  paid  in,  providing  that 
this  shall  not  apply  to  any  foreign  corporation  engaged 
exclusively  in  the  business  of  lending  money  in  this  State, 
nor  to  any  insurance  company  that  is  required  by  law  to 
obtain  a  permit  from  the  Commissioner  of  Insurance  and 
Banking. 

SEC.  11.  Each  foreign  corporation  or  the  promoters 
of  any  proposed  foreign  corporation  desiring  to  sell  or 
contract  to  sell  its  stock  in  this  State  shall  first  file  with 
the  secretary  or  commissioner  a  like  power  of  attorney 
to  that  provided  for  life  insurance  corporations  in  Article 
4773,  Revised  Civil  Statutes  of  the  State  of  Texas  of  1911, 


LAW  OF  OIL  AND  NATURAL  GAS  79 

and  service  may  be  had  upon  the  corporation  and  the 
secretary  or  commissioner,  as  the  case  may  be,  as  therein 
provided  for,  and  the  secretary  or  commissioner,  as  the 
case  may  be,  upon  receipt  of  such  process  as  is  therein 
provided  for,  shall  proceed  as  is  provided  for  him  to  do  in 
Article  4774,  Revised  Civil  Statutes  of  the  State  of  Texas 
of  1911,  and  the  secretary  or  commissioner's  acts  and 
conduct  in  regard  to  such  power  of  attorney,  and  such 
process  shall  be  the  same  as  is  provided  for  in  said 
Articles  4774  and  4773,  and  the  effect,  force  and  result 
of  such  acts  shall  be  the  same  as  therein  provided  for. 

SEC.  12.  It  shall  hereafter  be  unlawful  for  any  officer, 
agent  or  employe  or  trustee,  or  holding  company,  or  sales 
agents,  or  person,  or  association  of  persons  in  this  State 
to  sell,  or  offer  to  sell,  or  contract  to  sell,  directly  or  in- 
directly, for  such  concern,  any  stock  of  any  corporation  or 
proposed  corporation,  subject  to  this  act,  which  has  been, 
proposed  to  be,  is  now  being,  or  may  hereafter  be  organ- 
ized for  profit,  without  first  complying  with  the  pro- 
visions of  this  act,  and  any  person  so  offending  shall  be 
guilty  of  a  misdemeanor,  and  upon  conviction  shall  be 
fined  not  less  than  twenty-five  dollars  nor  more  than  two 
thousand  dollars,  and  in  addition  thereto  may  be  impris- 
oned in  the  county  jail  for  any  period  not  more  than  one 
year,  or  by  both  such  fine  and  imprisonment. 

SEC.  12a.  At  the  expiration  of  two  years  from  the 
granting  of  a  permit  under  this  act  if  the  proposed  cor- 
poration has  failed  to  organize,  then  all  subscribers  must 
be  refunded  the  amount  paid  to  the  promoter  or  trustee; 
provided,  however,  that  the  secretary  or  commissioner 
may  grant  an  extension  of  time  for  the  sale  of  securities. 

SEC.  13.  This  act  shall  be  construed  to  be  cumulative 
of  any  other  law  or  laws  of  this  State. 

SEC.  14.  The  terms  of  this  act  shall  not  apply  to  any 
national  bank,  nor  to  any  corporation  having  a  charter 
granted  under  any  act  of  the  Congress  of  the  United 
States,  nor  to  any  State  bank,  bank  and  trust  company 
or  trust  company  organized  under  the  laws  of  this  State, 
nor  to  any  corporation  organized  under  the  Federal  Re- 


80  LAW  OF  OIL  AND  NATURAL  GAS 

clamation  Act,  approved  June  17,  1902,  or  the  regulations 
established  by  the  Secretary  of  the  Department  of  the 
Interior  in  pursuance  thereof.  Nor  shall  the  terms  of 
this  act  apply  to  any  corporation  or  the  promoters  of  any 
corporation  organized  under  the  laws  of  Texas  which  does 
not  sell  or  contract  to  sell  its  stock  to  more  than  twenty- 
five  bona  fide  purchasers;  provided,  it  does  not  act  as  the 
agent  or  trustee,  holding  company  or  sales  company  in  the 
promotion  of  any  concern  which  is  included  under  the 
terms  of  this  act.  Nor  shall  this  act  apply  to  any  railroad 
or  railway  company,  or  interurban  railroad  or  rail- 
way company,  or  street  railroad  or  railway  company. 
Nor  shall  this  act  apply  to  the  sale  of  stock  of 
a  corporation  by  a  bona  fide  owner  of  same,  who 
had  in  good  faith  bought  the  same,  and  who  in  the 
purchase  and  sale  of  same  was  and  is  not  acting  directly 
or  indirectly  as  promoter  or  agent  of  such  corporation. 
Nor  shall  this  act  apply  to  a  bona  fide  stock  or  stock 
broker  in  the  sale  of  stock,  which  stock  has  been  by  such 
corporation  sold  and  issued  to  a  bona  fide  purchaser  prior 
to  the  offering  of  same  for  sale  by  such  broker;  provided, 
that  such  purchaser  or  broker  was  not  acting,  directly  or 
indirectly,  as  promoter  of  such  corporation. 

SEC.  15.  All  moneys  collected  under  the  terms  of  this 
act  by  the  secretary  or  commissioner  shall  be  quarterly 
deposited  by  him  with  the  State  Treasurer  and  credited 
to  the  general  fund.  Whenever  the  secretary  or  commis- 
sioner shall  deem  it  necessary  to  examine  the  books  of 
any  corporation  or  proposed  corporation,  subject  to  the 
provisions  of  this  act,  or  investigate  its  financial  condition? 
he  shall  do  so  at  the  expense  of  the  corporation  or  pro- 
posed corporation  under  investigation,  and  the  corpora- 
tion or  the  agents  of  the  corporation  or  proposed  corpo- 
ration being  investigated  shall  pay  to  the  secretary  or 
commissioner,  or  his  agent,  making  the  investigation  his 
actual  expenses  and  seven  dollars  and  fifty  cents  per  day 
for  such  investigation,  which  said  expenses  shall  be  paid 
at  the  termination  of  such  investigation  by  the  concern 
investigated. 


LAW  OF  OIL  AND  NATURAL  GAS  81 

SEC.  16.  Whenever  the  word  "secretary"  is  used  in  this 
act  it  shall  be  considered  to  mean  Secretary  of  the  State 
of  Texas,  and  whenever  the  word  "commissioner"  is  used 
in  this  act  it  shall  be  considered  to  mean  Commissioner  of 
Insurance  and  Banking  of  the  State  of  Texas. 

SEC.  17.  The  fact  that  there  is  no  law  in  this  State 
regulating  the  sale  of  stocks  of  numerous  corporations 
which  are  selling  such  stocks  throughout  this  State,  many 
of  which  are  worthless,  and  the  fact  that  the  people  of 
this  State  are  being  imposed  upon  by  unscrupulous  per- 
sons selling  such  worthless  stocks,  creates  an  emergency 
and  an  imperative  public  necessity  that  the  constitutional 
rule  requiring  that  bills  be  read  on  three  several  days  be 
suspended,  and  that  this  act  shall  take  effect  and  be  in 
force  from  and  after  its  passage,  and  it  is  so  enacted. 

[NOTE. — H.  B.  No.  9  was  passed  by  the  House  August 
14,  1913,  but  no  vote  given ;  House  granted  request  of  Sen- 
ate for  return  of  bill  August  19,  1913,  and  concurred  in 
Senate  amendments  August  19,  1913,  by  the  following 
vote:  yeas  69,  nays  35,  and  was  passed  by  the  Senate  Au- 
gust 19,  1913,  but  no  vote  given.] 

Approved  August  21,  1913. 

Takes  effect  90  days  after  adjournment. 

DIGEST  OF  OPINION  OF  ATTORNEY  GENERAL 
CONSTRUING  THE   LAW. 

1.  (a)     The  Blue  Sky  Law  does  not  apply  to  the  sale 
of  stock  by  corporations  which  had  been  chartered  prior 
to  the  date  the  law  went  into  effect,  in  so  far  as  their  orig- 
inal stock  is  concerned. 

(b)  It  does  not  apply  to  the  increased  capital  stock  of 
corporations  chartered  prior  to  the  time  the  law  went  into 
effect,  where  such  increase  took  place  prior  to  the  taking 
effect  of  this  Act  of  the  Legislature. 

2.  (a)     The  following  classes  of  corporations  are  ex- 
empt from  the  provisions  of  the  Blue  Sky  Law:     All  cor- 


82  LAW  OF  OIL  AND  NATURAL  GAS 

porations,  or  the  promoters  thereof,  which  do  not  directly 
or  indirectly  agree  to  pay  any  commission,  promotion  or 
organization  fees  incident  to  the  sale  of  its  stock,  unless 
such  corporations  are  mining,  oil,  gas  or  townsite  cor- 
porations. In  the  case  of  the  last  named  character  of  cor- 
porations the  provisions  of  the  law  apply,  regardless  of 
the  question  of  the  payment  of  promotion  or  other  fees 
incident  to  the  organization. 

(b)  The  terms  of  the  Act  do  not  apply  to  any  national 
bank  nor  to  any  corporation  having  a  charter  granted 
under  any  Act  of  Congress,  nor  to  any  State  bank  or  trust 
company  organized  under  the  laws  of  this  State,,  nor  to 
any  corporation  organized  under  the  Federal  Reclamation 
Act,  nor  does  the  Act  apply  to  any  corporation  or  its 
promoters   where   such  corporation   organized   under   the 
laws  of  this  State  does  not  sell  or  contract  to  sell  its  stock 
to  more  than  twenty-five  bona  fide  purchasers;  provided, 
such  corporation  does  not  act  as  agent  or  trustee,  holding 
or  sales  company,  in  the  promotion  of  any  concern  in- 
cluded within  the  terms  of  the  Act.     This  exemption  ap- 
plies to  mining,   oil,  gas  and  townsite  corporations  the 
same  as  it  does  to  other  corporations. 

(c)  The  Act  does  not  apply  to  any  railroad  corpora- 
tion, interurban  nor  street  railway. 

(d)  It  does  not  apply  to  the  sale  of  stock  of  the  cor- 
poration by  a  bona  fide  owner  of  the  same,  who  in  good 
faith  bought  the  same  and  is  not  acting,  directly  or  in- 
directly, as  a  promoter  or  agent  of  the  corporation. 

(e)  Nor  does  the  Act  apply  to  a  bona  fide  stock  or 
stock  broker  in  the  sale  of  stock,  which  stock  has  been 
theretofore  issued  and  sold,  bona  fide,  to  some  purchaser; 
provided,  however,  that  such  purchaser  or  broker  is  not 
acting,  directly  or  indirectly,  as  promoter  of  the  corpo- 
ration. 

3.  (a)  The  Blue  Sky  Law  applies  to  townsite,  mining, 
oil  and  gas  corporations  incorporated  under  the  laws  of 
this  State  where  its  increased  capital  stock  is  paid  out 
of  the  surplus  earnings  of  the  corporation ;  provided,  how- 


LAW  OF  OIL  AND  NATURAL  GAS  83 

ever,  that  the  purpose  of  the  increase  is  to  sell  the  stock 
based  on  its  increased  capital. 

(b)  But  where  the  increased  capital  is  paid  in  by  the 
existing  stockholders  and  the  stock  is  issued  directly  to 
them,  or  where  the  stock  is  issued  against  the  surplus 
earnings  of  the  company  in  the  nature  of  a  stock  divi- 
dend, then  such  acts  do  not  come  under  the  provisions  of 
the  law. 

(c)  Any  act  of  the  corporation  which  does  not  amount 
to  a  sale  of  stock  by  it  or  by  promoters  for  it,  is  not  sub- 
ject to  the  law. 

4.  Certain  portions  of  Section  3  of  the  Act  are  uncon- 
stitutional and  should  be  disregarded. 

5.  If  a  foreign  corporation  had  secured  its  charter  and 
was  in  all  things  duly  incorporated  prior  to  the  enactment 
of  the  Blue  Sky  law  then  the  sale  of  its  original  capital 
stock  would  not  come  within  the  terms  and  provisions  of 
the  Blue  Sky  Law. 

6.  (a)     Promotion     fees,     commissions,     organization 
fees  and  other  incidental  expenses  incurred  prior  to  the 
chartering  of  the  corporation,  cannot  be  paid  out  of  the 
capital  stock  of  the  corporation  taken  at  its  par  value, 
and  such  fees  must  be  collected  from  the  purchasers  of 
stock  in  addition  to  par  value  of  the  stock. 

(b)  Attorney's    fees,    charter    fees,    franchise    taxes, 
permit  fees  and  expenditures  for  stationery  and  supplies 
may  be  paid  out  of  the  capital  stock  taken  at  its  par  value. 

(c)  A  promoter  is  one  who  actively  engages  in  the 
financing  and  organization  of  an  enterprise  under  the  cor- 
porate form,  and  may  be  defined  as  a  person  to  bring 
about  the  incorporation  and  organization  of  corporations. 

(d)  The  constitutional  provision  providing  that  cor- 
porations can  only  issue  stock  for  money  paid,  labor  done 
or  property  actually  received,  means  money  paid  to  the 
corporation,  labor  done  for  the  corporation  and  property 
actually  received  by  the  corporation. 

(e)  The   word   "property,"   as  used   in  the   Constitu- 
tion, means  something  substantial  and  capable  of  being 


84  LAW  OF  OIL  AND  NATURAL  GAS 

made  an  asset  of  the  corporation,  which  might  respond  in 
law  to  the  claims  of  creditors. 

(f)  The  term  "money  paid"  is  definite  and  plain.     It 
does  not  mean  that  the  stock  may  be  sold  for  money  to 
be  paid,  but  must  be  sold  for  cash.     Of  course,  the  pay- 
ments may  be  made  in  installments,  but  the  stock  must 
be  paid  for  in  money. 

(g)  The  property  which  may  be  received  by  a  corpo- 
ration in  payment  of  stock  must  be  such  property  as  the 
corporation  has  authority  under  its  charter  to  take  and 
hold ;  if  the  property  is  not  such  as  is  necessary  or  proper 
for  the   conduct   of  the   corporation's   business,    then   it 
could  not  issue  stock  therefor. 

(h)  The  labor  performed  by  a  promoter  or  stock 
salesman  is  not  labor  performed  for  the  corporation  and 
can  not  be  paid  for  out  of  the  capital  stock  of  the  corpo- 
ration, and  if  paid  by  the  corporation,  must  be  paid  out 
of  a  sum  of  money  collected  for  such  purpose  in  addition 
to  the  par  value  of  the  capital  stock. 


OPINION. 

ATTORNEY  GENERAL'S  DEPARTMENT, 

AUSTIN,  TEXAS,  February  10,  1914. 

Hon.  F.  C.  Weinert,  Secretary  of  State,  Capitol. 

DEAR  SIR:  This  department  has  from  time  to  time 
rendered  you  various  opinions  construing  what  is  known 
as  the  Blue  Sky  Law.  You  have  stated  to  us  that  you  de- 
sired to  publish  the  holdings  heretofore  made  in  regard 
to  this  measure  in  a  pamphlet  with  the  forms  prepared 
by  this  department  for  your  use  and  have  requested  that 
the  several  holdings  heretofore  made  by  us  be  placed  in 
one  opinion  for  the  convenience  of  your  department  and 
of  those  who  might  have  occasion  to  consider  the  rulings 
of  this  department  on  the  questions  in  issue.  This  opinion 
is  now  written  for  the  purpose  stated. 


LAW  OF  OIL  AND  NATURAL  GAS  85 

The  subject  of  this  discussion  is  what  is  known  as  the 
Blue  Sky  Law,  being  Chapter  32,  Acts  of  the  First  Called 
Session  of  the  Thirty-third  Legislature.  This  measure  was 
approved  by  the  Governor  on  August  21,  1913,  and  became 
a  law  ninety  days  after  the  adjournment  of  the  Legisla- 
ture, which  adjournment  took  place  on  August  19,  1913. 
The  law,  therefore,  became  effective  on  the  18th  day  of 
November,  1913. 

1. 

The  first  question  for  consideration  is:  Does  the  Blue 
Sky  Law  apply  to  the  sale  of  stock  by  corporations  which 
had  been  chartered  prior  to  the  date  the  law  went  into 
effect,  as  to  their  original  issue  of  capital  stock,  and  does 
it  apply  to  the  increased  capital  stock  of  corporations 
where  such  increase  took  place  prior  to  the  taking  effect 
of  this  Act  of  the  Legislature? 

We  answer  this  question  in  the  negative  and  say  that  the 
law  does  not  apply  to  such  corporations.  This  is  appa- 
rent from  the  consideration  of  the  context  of  the  Act. 
For  example,  Section  1  of  the  Act  provides  in  substance 
that  every  private  corporation  attempting  at  the  time  the 
Act  takes  effect  or  which  might  thereafter  attempt  to  in- 
crease its  capital  stock,  and  every  proposed  corporation 
attempting  to  be  organized  when  the  Act  takes  effect  or 
thereafter,  must  comply  with  the  provisions  of  the  Act, 
provided,  of  course,  such  corporations  do  not  come  within 
the  exceptions  named  in  the  Act. 

Section  3  of  the  Act  also  makes  it  clear  that  the  pro- 
visions of  the  Act  apply  only  to  increase  of  capital  stock 
of  existing  corporations  made  after  the  Act  takes  effect 
and  to  corporations  chartered  after  the  Act  takes  effect, 
for  it  provides,  in  substance,  the  following: 

"Before  offering  for  sale  or  contracting  to  sell,  di- 
rectly or  indirectly,  any  stock  of  such  proposed  cor- 
poration, or  such  increased  stock  of  any  existing  cor- 
poration, etc." 


86  LAW  OF  OIL  AND  NATURAL  GAS 

A  part  of  Section  4  also  reads  to  the  same  conclusion : 

"Provided,  that  where  any  proposed  corporation  has 
already  sold  stock,  or  a  part  thereof,  or  any  part 
thereof  has  been  subscribed  at  the  time  this  Act  shall 
take  effect,  this  act  shall  not  affect  stock  previously 
sold  or  subscribed  nor  any  contracts  made  in  refer- 
ence to  same." 

If,  however,  the  context  of  the  Act  should  give  rise  to 
any  doubt  as  to  this  issue,  the  caption  of  the  Act  settles 
the  question  of  construction.  The  caption  reads  as  fol- 
lows: 

"An  Act  to  regulate  and  supervise  the  sale  and 
purchase,  in  this  State,  of  stocks  of  private,  foreign 
and  domestic  corporations  organized  for  profit,  which 
propose  to  increase  their  capital  stock;  and  to  regu- 
late and  supervise  the  sale  and  purchase,  in  this  State, 
of  stocks  of  private,  foreign  and  domestic  corpora- 
tions being  organized  and  hereafter  organized  or  pro- 
posed to  be  organized,  for  profit;  and  to  regulate  and 
supervise  the  offering  or  contracting  for  sale  and 
purchase  of  such  stock  of  such  corporation  or  pro- 
posed corporation,  and  to  fix  commission  and  promo- 
tion fees  allowed  to  be  charged;  and  providing  for 
service  of  process,  examination  fees,  and  exempting 
certain  corporations  from  the  effect  of  this  Act;  pro- 
viding penalty  for  the  violation  of  the  provisions  of 
this  Act,  and  declaring  an  emergency." 

It  is  a  well  recognized  rule  of  construction  that  the  cap- 
tion of  the  Act  is  one  of  the  proper  sources  to  which  we 
may  look  in  determining  the  meaning  and  intent  of  the 
Act. 

State  vs.  Delesdenier,  7  Texas,  76. 
Byrnes  vs.  Sampson,  74  Texas,  79. 

Walraven  vs.  Farmers,  etc.,  National  Bank,  96  Texas, 
331. 
Texas-Mexican  Ry.  Co.  vs.  Jarvis,  69  Texas,  527. 


LAW  OF  OIL  AND  NATURAL  GAS  87 

This  construction  is  also  consistent  with  the  due  regard 
for  the  vested  rights  of  existing  corporations.  If  we 
should  hold  that  the  provisions  of  this  Act  apply  to  the 
increased  capital  stock  of  corporations  where  the  increase 
had  been  made  under  provisions  of  law  prior  to  the  taking 
effect  of  the  Act,  then  we  should  meet  with  serious  consti- 
tutional objections  to  the  Act;  because  such  increase  of 
capital  would  have  been  made  under  existing  law  and  the 
right  of  the  corporation  to  dispose  of  this  stock  in  the 
manner  then  provided  by  statute  would  be  a  vested  right, 
which  could  not  be  interfered  with  by  the  Legislature, 
even  under  the  provisions  of  our  law  which  reserved  to 
the  State  the  right  to  alter  or  amend  the  charters  of  cor- 
porations or  the  laws  governing  the  same.  In  other  words, 
the  limitations  placed  by  this  Act  on  the  right  of  a  cor- 
poration to  sell  its  stock,  the  manner  of  its  sale  and  the 
method  of  its  contracting  with  parties  for  the  sale  of  the 
same  are  not  the  regulation  of  an  existing  right,  but  in 
many  respects  the  destruction  of  an  existing  right  and 
are  such  character  of  regulation  as  to  substantially  im- 
pair the  rights  of  a  corporation  whose  stock  was  issued 
under  the  old  law  or  whose  capital  or  increased  capital 
was  provided  for  under  the  old  law.  The  rule  is  stated 
thus  by  Judge  Cooley  in  his  great  work  on  Constitutional 
Limitations : 

"The  maxim,  Sic  utere  tuo  ut  alienum  non  laedas, 
is  that  which  lies  at  the  foundation  of  the  power;  and 
to  whatever  enactment  affecting  the  management  and 
business  of  private  corporations  it  cannot  fairly  be 
applied,  the  power  itself  will  not  extend.  It  has  ac- 
cordingly been  held  that  when  a  corporation  was  char- 
tered with  the  right  to  take  toll  from  passengers  over 
their  road,  a  subsequent  statute  authorizing  a  certain 
class  of  persons  to  go  toll  free  was  void.  This  was 
not  a  regulation  of  existing  rights,  but  it  took  from 
the  corporation  that  which  they  before  possessed, 
namely,  the  right  to  tolls,  and  conferred  upon  indi- 
viduals that  which  before  they  had  not,  namely  the 
privilege  to  pass  over  the  road  free  of  toll.  Towers, 


88  LAW  OF  OIL  AND  NATURAL  GAS 

it  is  said  in  another  case,  'which  can  only  be  justified 
on  this  specific  ground  (that  they  are  police  regula- 
tions), and  which  would  otherwise  be  clearly  prohib- 
ited by  the  Constitution,  can  be  such  only  as  are  so 
clearly  necessary  to  the  safety,  comfort,  and  well-be- 
ing of  society,  or  sr  imperatively  required  by  the 
public  necessity,  as  tt  lead  to  the  rational  and  satis- 
factory conclusion  that  the  framers  of  the  Constitu- 
tion could  not,  as  men  of  ordinary  prudence  and  fore- 
sight, have  intended  to  prohibit  their  exercise  in  the 
particular  case,  notwithstanding  the  language  of  the 
prohibition  would  otherwise  include  it.'  And  it  was 
therefore  held  that  an  act  subsequent  to  the  charter 
of  a  plank  road  company,  and  not  assented  to  by  the 
corporators,  which  subjected  them  to  a  total  forfeiture 
of  their  franchises  for  that  which  by  the  charter  was 
cause  for  partial  forfeiture  only,  was  void  as  im- 
pairing the  obligation  of  contracts.  And  even  a  pro- 
vision in  a  corporate  charter,  empowering  the  Legis- 
lature to  alter,  modify,  or  repeal  it  would  not  author- 
ize a  subsequent  act  which,  on  pretense  of  amendment, 
or  of  a  police  regulation  would  have  the  effect  to 
appropriate  a  portion  of  the  corporate  property  to 
the  public  use.  And  where  by  its  charter  the  corpo- 
ration was  empowered  to  construct  over  a  river  a 
certain  bridge,  which  must  necessarily  constitute  an 
obstruction  to  the  navigation  of  the  river,  a  subse- 
quent amendment  making  the  corporation  liable  for 
such  obstruction  was  held  void,  as  in  effect  depriving 
the  corporation  of  the  very  right  which  the  charter 
assured  to  it.  So  where  the  charter  reserved  to  the 
Legislature  the  right  of  modification  after  the  corpo- 
rators had  been  reimbursed  their  expenses  in  con- 
structing the  bridge,  with  twelve  per  cent  interest 
thereon,  an  amendment  before  such  reimbursement, 
requiring  the  construction  of  a  fifty-foot  draw  for 
the  passage  of  vessels,  in  place  of  one  of  thirty-two 
feet,  was  held  unconstitutional  and  void."  (Cooley's 
Constitutional  Limitations,  pp.  710-712.) 


89 

So  we  suggest  that  if  any  construction  other  than  that 
which  we  give  this  law  should  be  given  it,  then  serious 
constitutional  objections  are  met  with,  and  we  believe  that 
it  is  proper  for  us  to  give  the  Act  a  construction  which 
will  make  it  in  this  respect  constitutional.  The  general  rule 
is  that  a  statute  should  not  be  held  invalid  if  it  can  be 
so  construed,  considering  all  its  provisions,  as  to  make  it  a 
valid  one,  and  a  construction  which  would  render  the 
statute  unconstitutional  will  not  be  adopted  where  a  con- 
stitutional purpose  can  fairly  be  derived  from  its  terms. 

Brown  vs.  City  of  Galveston,  97  Texas,  1. 
Robinson  vs.  Varnell,  16  Texas,  382. 
G.  H.  &  S.  A.  Ry.  Co.  vs.  State,  93  S.  W.,  464. 
Runge  &  Co.  vs.  Wyatt,  25  Texas  Supp.,  292. 
Womack  vs.  Womack,  17  Texas,  1. 
Madden  vs.  Hardy,  92  Texas,  613. 

So  on  the  whole  we  conclude,  and  so  advise  you,  that  the 
Blue  Sky  Law  does  not  apply  to  the  increased  capital 
stock  of  corporations  where  such  increase  was  made  prior 
to  the  time  the  Act  took  effect,  and  that  it  does  not  apply 
to  the  capital  stock  of  corporations  which  were  incorpo- 
rated prior  to  the  time  the  Act  took  effect.  Of  course,  the 
Act  will  apply  to  all  increases  of  capital  stock  made  after 
the  Act  took  effect,  whether  such  corporations  were  in- 
corporated prior  to  that  time  or  since  that  time,  provided, 
of  course,  the  corporations  are  not  within  the  exceptions 
specified  in  the  Act. 

2. 

(a)  You  are  advised  that  the  following  classes  of  cor- 
porations are  exempt  from  the  provisions  of  this  Act :  All 
corporations,  or  the  promoters  thereof,  which  do  not  di- 
rectly or  indirectly  agree  to  pay  any  commission,  pro- 
motion, organization  or  other  fees  or  expenses  incident 
to  the  sale  of  its  stock,  unless,  of  course,  such  corporations 
are  mining,  oil,  gas  or  townsite  corporations;  in  the  event 
a  corporation  is  a  mining,  oil,  gas  or  townsite  corpora- 


90  LAW  OF  OIL  AND  NATURAL  GAS 

tion,  then  the  provisions  of  the  Act  apply  regardless  of 
whether  or  not  a  promotion  fee  or  other  fee  incident  to 
the  sale  of  the  stock  is  charged. 

(b)  The  terms  of  the  Act  do  not  apply  to  any  national 
bank  nor  to  any  corporation  having  a  charter  granted 
under  any  Act  of  Congress  or  of  the  United  States,  nor  to 
any  State  bank  or  bank  and  trust  company  or  to  any 
trust  company  organized  under  the  laws  of  this  State,  nor 
to  any  corporation  organized  under  the  Federal  Reclama- 
tion Act,  approved  June  17,  1902,  or  the  regulations  es- 
tablished by  the  Secretary  of  the  Interior  in  pursuance 
thereof.     Nor  do  the  terms  of  the  Act  apply  to  any  cor- 
poration or  the  promoters  of  any  corporation  organized 
under  the  laws  of  Texas  which  does  not  sell  or  contract 
to  sell  its  stock  to  more  than  twenty-five  bona  fide  purchas- 
ers, provided,  of  course,  such  corporation  does  not  act  as 
agent  or  trustee,  holding  company  or  sales  company  in 
the  promotion  of  any  concern  which  is  included  under  the 
terms  of  this  Act. 

This  exemption  applies  to  mining,  oil,  gas  and  townsite 
corporations  the  same  as  it  does  to  other  corporations. 

(c)  The  Act  does  not  apply  to  any  railroad  or  railway 
corporation  or  interurban  railroad  or  railway   company 
or  to  any  street  railroad  or  railway  company. 

(d)  Nor  does  the  Act  apply  to  the  sale  of  stock  of 
the  corporation  by  a  bona  fide  owner  of  the  same  who  in 
good  faith  bought  the  same  and  who  in  the  purchase  and 
sale  of  the  same  is  not  acting  directly  or  indirectly  as  a 
promoter  or  agent  of  such  corporation;  and 

(c)  Nor  does  the  Act  apply  to  a  bona  fide  stock  or 
stock  broker  in  the  sale  of  stock,  which  stock  has  been  by 
such  corporation  sold  and  issued  to  a  bona  fide  purchaser 
prior  to  the  offering  of  same  for  sale  by  such  broker;  pro- 
vided, of  course,  that  such  purchaser  or  broker  was  not 
acting,  directly  or  indirectly,  as  promoter  of  such  cor- 
poration. 


LAW  OF  OIL  AND  NATURAL  GAS  91 

3. 

Among  the  other  questions  propounded  by  you  is  the 
following : 

"Does  Chapter  32,  Acts  of  the  First  Called  Session 
of  the  Thirty-third  Legislature,  apply  to  townsite, 
mining,  oil  and  gas  corporations  incorporated  under 
the  laws  of  this  State  where  all  of  the  increase  is  paid 
in  cash  or  paid  out  of  the  surplus  earnings  of  the 
corporation?" 

We  answer  this  question  and  state  that  where  the  pur- 
pose of  the  corporation  is  to  sell  the  stock  upon  its  in- 
creased capital,  then  that  such  corporation  comes  under 
the  terms  and  provisions  of  the  law  regardless  of  whether 
or  not  the  increased  capital  was  paid  in  cash  or  whether 
the  stock  is  issued  against  the  surplus  earnings  of  the  cor- 
poration, but  where  the  increased  capital  is  paid  in  by 
the  existing  stockholders  and  stock  is  issued  directly  to 
them,  or  where  the  stock  is  issued  against  the  surplus 
earnings  of  the  company  in  the  nature  of  a  stock  dividend 
and  no  promotion  fee  of  any  kind  is  charged,  then  the  cor- 
poration in  that  matter  does  not  come  under  the  provisions 
of  the  law;  the  reason  being  that  no  sale  of  the  stock  is 
made  and  the  purpose  of  the  Act  is  to  regulate,  as  stated 
in  the  caption,  "the  sale  and  purchase  in  this  State  of 
stocks,  etc." 

Any  act  of  the  corporation  which  does  not  amount  to  a 
sale  of  stock  by  it  or  by  promoters  for  it  would  not  be 
subject  to  the  provisions  of  the  law,  except,  of  course, 
where  such  act  is  material  to  the  sale  of  the  stock,  when 
it  might  or  might  not  come  under  the  provisions  of  the 
law,  depending  on  the  nature  and  quality  of  the  act. 

4. 

We  now  direct  your  attention  to  a  portion  of  Section  3 
of  this  Act,  which  is  wholly  void  and  of  no  effect,  and 


92  LAW  OF  OIL  AND  NATURAL  GAS 

should  be  disregarded  by  you.     This  part  of  the  section 
is  as  follows: 

"No  corporation  proposed  to  be  organized  for  the 
purpose  of  buying  or  selling  townsites  and  town  lots 
shall  hereafter  be  granted  a  charter  by  the  Secretary 
of  State,  or  if  a  foreign  corporation  shall  not  be 
granted  a  permit  to  do  business  in  the  State  of  Texas, 
unless  the  incorporators  of  said  proposed  corporation 
or  officer  of  such  foreign  corporation  shall  file  with 
the  Secretary  of  State  each  and  every  document,  con- 
tract and  all  papers  referred  to  in  Section  3  of  this 
Act,  as  well  as  a  general  statement  of  the  plan  of 
its  proposed  townsite,  and  a  general  statement  of  its 
methods  of  advertising  same,  together  with  a  sample 
copy  of  its  advertising  literature,  and  no  charter  shall 
be  granted  any  corporation  unless  after  the  compli- 
ance with  the  provisions  of  this  Act  and  in  the  judg- 
ment of  the  Secretary  of  State,  such  business  of  any 
proposed  townsite  corporation  will  be  honestly  and 
fairly  conducted  both  to  the  corporation  and  to  the 
public.  And  each  and  every  corporation  in  this  State 
now  existing  or  hereafter  organized  desiring  to  en- 
gage in  the  sale  of  townsite  lots  or  sites  shall,  prior 
to  such  sale,  file  with  the  Secretary  of  State  a  general 
plan  of  said  proposed  lots  to  be  sold,  as  well  as  a  copy 
of  any  and  all  proposed  contracts  to  be  made  with  the 
public  in  the  sale  thereof,  and  a  general  statement 
of  the  literature  proposed  to  be  issued,  and  all  matter 
referred  to  in  Section  3  hereof,  and  if  in  the  judgment 
of  the  Secretary  of  State  said  sale  will  be  conducted 
both  honestly  and  fairly  to  the  corporation  and  to 
the  public  a  permit  to  conduct  said  sale  shall  be 
granted.  This  provision  shall  not  be  construed  to 
authorize  the  creation  of  any  corporation  for  any  pur- 
pose not  now  authorized  by  the  laws  of  this  State." 

It  will  be  noted  from  a  reading  of  the  foregoing  excerpt 
from  the  Act  that  it  relates  wholly  and  solely  to  the  incor- 
poration of  townsite  corporations  and  the  conduct  of  the 


LAW  OF  OIL  AND  NATURAL  GAS  93 

business  of  townsite  companies  in  the  sale  of  town  lots. 
In  other  words,  it  requires  certain  conditions  of  townsite 
companies  before  they  may  be  incorporated,  and  requires 
them  to  obtain  a  permit  on  certain  conditions  before  they 
may  be  permitted  to  sell  their  lots.  This  subject  is  one 
entirely  foreign  to  the  general  purposes  of  the  bill  and 
has  no  relations  to  the  sale  and  purchase  of  stocks.  We 
do  not  know  the  history  of  its  incorporation  in  the  pro- 
visions of  this  measure,  but  it  is  very  clear  that  the  subject 
of  the  provision  quoted  above  is  not  embraced  within  the 
caption  of  the  Act  and  such  omission  to  place  it  in  the 
caption  is  fatal  to  the  provision. 

We  direct  your  attention  to  Section  35,  Article  3,  of  our 
Constitution,  which  provides: 

"No  bill  (except  general  appropriation  bills,  which 
may  embrace  the  various  subjects  and  accounts,  for 
and  on  account  of  which  moneys  are  appropriated) 
shall  contain  more  than  one  subject,  which  shall  be 
expressed  in  its  title.  But  if  any  subject  shall  be  em- 
braced in  an  act  which  shall  not  be  expressed  in  the 
title,  such  act  shall  be  void  only  as  to  so  much  thereof 
as  shall  not  be  so  expressed." 

We  have  already  quoted  the  caption  or  title  of  this  Act, 
and  it  is  not  necessary  here  to  re-state  the  same,  but  the 
title  of  the  Act  has  to  do  only  with  the  supervision  of  the 
purchase  and  sale  of  stocks  and  in  no  part  of  the  same 
makes  any  reference  to  imposing  terms  upon  which  town- 
site  companies  may  be  incorporated  or  imposing  terms 
under  which  townsite  companies  may  be  permitted  to  sell 
their  town  lots.  The  title  in  substance  is: 

"An  Act  to  regulate  and  supervise  the  sale  and  pur- 
chase in  this  State  of  stocks  of  private,  foreign  and 
domestic  corporations  which  propose  to  increase  their 
capital  stock;  and  to  regulate  and  supervise  the  sale 
and  purchase,  in  this  State,  of  stocks  of  private,  foreign 
and  domestic  corporations  being  organized,  etc." 


94  LAW  OF  OIL  AND  NATURAL  GAS 

There  is  absolutely  nothing  in  the  title  to  the  Act  indi- 
cating any  intention  to  pass  a  law  regulating  the  incor- 
poration of  townsite  companies  or  the  sale  of  town  lots. 
Therefore,  so  much  of  the  Act  as  we  have  just  quoted 
above,  relative  to  incorporating  townsite  companies  and 
the  sale  and  obtaining  permits  to  sell  town  lots  by  such 
companies,  is  unconstitutional,  void,  of  no  effect  and 
should  be  disregarded  by  you. 

Art.  3,  Sec.  35,  of  the  Constitution. 
M.  K.  &  T.  Ry.  Co.  vs.  The  State,  102  Texas,  155. 
Clark  vs.  Commissioners,  54  Kansas,  634. 
Henderson  vs.  Insurance  Co.  20  L.  R.  A.,  829. 
State  vs.  Co.  Comm.,  47  Neb.,  428. 

In  the  case  of  M.  K  &  T.  Ry.  Co.  vs.  State,  cited  above, 
the  caption  of  the  bill  denned  it  to  be:  "An  Act  to  pro- 
tect the  rights  and  property  of  the  traveling  public  and  the 
employes  of  the  railroads  in  the  State  of  Texas."  The  first 
and  second  sections  of  the  Act  made  it  unlawful  for  rail- 
road companies  to  run  any  passenger  train,  freight  train, 
or  light  engine  outside  of  the  yard  limits  with  less  than 
the  full  crews  of  the  number  of  men  specified  for  each. 
The  Supreme  Court  of  this  State  held  that  the  caption  was 
wholly  insufficient  and  that  it  did  not  express  the  subject 
of  the  Act.  In  passing  upon  the  .question,  the  court  said : 

"Is  that  subject  expressed  in  the  title?  We  think  it 
clear  it  is  not.  The  title  no  more  expresses  and  di- 
rects attention  to  that  subject  than  it  would  to  any 
other  legislation  which  might  have  been  written  under 
it,  the  tendency  of  which  might  have  been  to  protect 
the  lives  and  property  of  the  traveling  public  and  of 
railroad  employes,  such  as  laws  directed  against  rob- 
bers, the  obstruction  of  or  injury  to  tracks,  interfer- 
ence with  cars  and  engines,  or  regulating  the  conduct 
of  persons  at  crossings,  or  the  giving  of  signals,  and 
numerous  others  that  might  be  instanced.  A  title  so 
general  as  that  of  this  Act  gives  no  intimation  of  the 


LAW  OF  OIL  AND  NATURAL  GAS  95 

particular  subject  to  which  the  body  of  the  Act  is  con- 
fined. That  which  is  expressed  in  the  title  is  not  the 
subject  of  the  Act,  but  the  general  end  or  purpose  to 
be  subserved.  *  *  *  The  title  must  not  only  ex- 
press a  subject,  but  must  express  that  which  is  dealt 
with  in  the  body  of  the  Act.  No  authority  but  the 
plain  language  of  the  Constitution  is  needed  for  that 
purpose." 

The  evident  purpose  of  the  Constitution  in  requiring 
that  the  subject  should  be  stated  in  the  bill  and  that  there 
should  not  be  two  purposes  in  any  one  bill,  was  to  prevent 
(a)  hodge  podge  or  log-rolling  legislation;  (b)  to  prevent 
surprise  or  fraud  upon  the  Legislature  by  means  of  pro- 
visions in  bills,  of  which  the  titles  give  no  intimation,  and 
which  might,  therefore,  be  overlooked  and  carelessly  or 
unintentionally  adopted;  and  (c)  to  fairly  apprise  the  peo- 
ple through  such  publication  of  legislation  as  is  usually 
made  of  the  subjects  of  legislation  that  are  being  consider- 
ed, in  order  that  they  may  have  an  opportunity  of  being 
heard  by  petition  or  otherwise,  if  they  shall  desire.  (Cooley 
on  Constitutional  Limitations,  p.  172.) 

Concerning  this  matter  Judge  Cooley  has  said: 

"1.  The  Evils  Designed  to  be  Remedied. — The  Con- 
stitution of  New  Jersey  refers  to  these  as  'the  im- 
proper influences  which  may  result  from  intermixing 
in  one  and  the  same  act  such  things  as  have  no  proper 
relation  to  each  other.'  In  the  language  of  the  Su- 
preme Court  of  Louisiana,  speaking  of  the  former 
practice:  'The  title  of  an  Act  often  afforded  no  clue 
to  its  contents.  Important  general  principles  were 
found  placed  in  Acts,  private  or  local  in  their  opera- 
tion; provisions  concerning  matters  of  practice  or  ju- 
dicial proceedings  were  sometimes  included  in  the 
same  statute  with  matters  entirely  foreign  to  them, 
the  result  of  which  was  that  on  many  important  sub- 
jects the  statute  law  had  become  almost  unintellig- 


96  LAW  OF  OIL  AND  NATURAL  GAS 

ible,  as  they  whose  duty  it  has  been  to  examine  or  act 
under  it  can  well  testify.  To  prevent  any  further 
accumulation  to  this  chaotic  mass  was  the  object  of 
the  constitutional  provision  under  consideration.'  The 
Supreme  Court  of  Michigan  say:  'The  history  and 
purpose  of  this  constitutional  provision  are  too  well 
understood  to  require  any  elucidation  at  our  hands. 
The  practice  of  bringing  together  into  one  bill  sub- 
jects diverse  in  their  nature  and  having  no  necessary 
connection,  with  a  view  to  combine  in  their  favor  the 
advocates  of  all,  and  thus  secure  the  passage  of  sev- 
eral measures,  no  one  of  which  could  succeed  upon 
its  own  merits,  was  one  both  corruptive  of  the  legisla- 
tor and  dangerous  to  the  State.  It  was  scarcely  more 
so,  however,  than  another  practice,  also  intended  to 
be  remedied  by  this  provision,  by  which,  through  dex- 
terous management,  clauses  were  inserted  in  bills  of 
which  the  titles  give  no  intimation,  and  their  passage 
secured  through  legislative  bodies  whose  members 
were  not  generally  aware  of  their  intention  and  ef- 
fect. There  was  no  design  by  this  clause  to  embar- 
rass legislation  by  making  laws  unnecessarily  restrict- 
ive in  their  scope  and  operation,  and  thus  multiplying 
their  number;  but  the  framers  of  the  Constitution 
meant  to  put  an  end  to  legislation  of  the  vicious  char- 
acter referred  to,  which  was  little  less  than  a  fraud 
upon  the  public,  and  to  require  that  in  every  case 
the  proposed  measure  should  stand  upon  its  own 
merits,  and  that  the  Legislature  should  be  fairly  sat- 
isfied of  its  design  when  required  to  pass  upon  it.' 
The  Court  of  Appeals  of  New  York  declare  the  ob- 
ject of  this  provision  to  be  'that  neither  the  members 
of  the  Legislature  nor  the  people  should  be  misled  by 
the  title.'  The  Supreme  Court  of  Iowa  say:  'The 
intent  of  this  provision  of  the  Constitution  was,  to 
prevent  the  union,  in  the  same  Act,  of  incongruous 
matters,  and  of  objects  having  no  connection,  no  re- 
lation. And  with  this  it  was  designed  to  prevent  sur- 
prise in  legislation,  by  having  matter  of  one  nature 


LAW  OF  OIL  AND  NATURAL  GAS  97 

embraced  in  a  bill  whose  title  expressed  another.' 
And  similar  expressions  will  be  found  in  many  other 
reported  cases.  It  may,  therefore,  be  assumed  as  set- 
tled that  the  purpose  of  these  provisions  was:  First, 
to  prevent  hodge-podge  or  'log-rolling'  legislation; 
second,  to  prevent  surprise  or  fraud  upon  the  Legisla- 
ture by  means  of  provisions  in  bills  of  which  the  titles 
gave  no  intimation,  and  which  might  therefore  be 
overlooked  and  carelessly  and  unintentionally  adopted ; 
and,  third,  to  fairly  apprise  the  people,  through  such 
publication  of  legislative  proceedings  as  is  usually 
made,  of  the  subjects  of  legielation  that  are  being 
considered,  in  order  that  they  may  have  opportunity 
of  being  heard  thereon,  by  petition  or  otherwise,  if 
they  shall  so  desire." 

However,  the  mere  fact  that  that  portion  of  the  Act 
just  above  quoted  by  us  is  unconstitutional  does  not  neces- 
sarily render  the  Act  void,  for  the  reason  that  the  Con- 
stitution itself  has  provided  against  just  such  a  contin- 
gency, for  the  constitutional  provision  referred  to  con- 
tains this  clause: 

"But  if  any  subject  shall  be  embraced  in  an  Act 
which  shall  not  be  expressed  in  the  title,  such  Act 
shall  be  void  only  as  to  so  much  thereof,  as  shall 
not  be  so  expressed." 

In  holding  that  portion  of  the  Act  quoted  and  here 
under  consideration  unconstitutional  and  void  we  have 
given  this  Act  the  most  considerate  and  tenderest  con- 
struction which  we  could  give  it.  If  we  were  to  hold 
that  the  portion  of  the  Act  quoted  was  embraced  within 
the  caption,  then  very  clearly  the  caption  would  contain 
two  subjects  and  would  be  in  violation  of  the  Constitution 
and  the  whole  Act  rendered  void. 

82  Texas,  496. 

San  Antonio  vs.  Gould,  34  Texas,  49. 

State  vs.  McCracken,  42  Texas,  383. 


98  LAW  OF  OIL  AND  NATURAL  GAS 

We  have  preferred,  therefore,  to  give  the  Act  a  con- 
struction which,  if  possible,  will  render  it  constitutional 
by  eliminating  from  the  Act  the  unconstitutional  and 
void  provision  referred  to  and  quoted.  We  have  here- 
tofore cited  authorities  showing  that  this  is  a  correct 
rule  of  construction.  It  is  also  one  generally  recognized 
by  the  courts  of  the  country.  (Cooley's  Constitutional 
Limitations,  p.  177.) 

5. 

The  next  question  for  consideration  is  that  suggested 
in  your  letter  of  December  24th  and  answered  in  our 
departmental  opinion  No.  1079,  which  question  was 
whether  or  not  the  Blue  Sky  Law  would  apply  to  the 
sale  of  stocks  made  in  this  State  under  a  contract  with 
a  foreign  corporation,  where  the  contract  was  made  prior 
to  the  enactment  of  the  Blue  Sky  Law. 

In  reply  to  this  inquiry,  we  beg  to  advise  you  that 
if  the  foreign  corporation  referred  to  had  secured  its 
charter  and  was  in  all  things  duly  incorporated  prior 
to  the  enactment  of  the  Blue  Sky  Law,  then  the  sale 
of  its  stock  would  not  come  within  the  terms  and  pro- 
visions of  the  Blue  Sky  Law;  in  other  words,  the  opinion 
heretofore  rendered  you  is  as  applicable  to  foreign  cor- 
porations as  it  is  to  domestic  corporations.  It  is  un- 
necessary for  us  to  enter  into  a  detailed  discussion  to  sup- 
port the  view  here  expressed,  but  we  call  your  attention 
to  the  caption  of  the  Blue  Sky  Law.  That  part  to 
which  we  direct  your  attention  reads  as  follows: 

"An  Act  to  regulate  and  supervise  the  sale  and 
purchase,  in  this  State,  of  stocks  of  private,  foreign 
and  domestic  corporations  organized  for  profit,  which 
propose  to  increase  their  capital  stock;  and  to  regu- 
late and  supervise  the  sale  and  purchase,  in  this* 
State,  of  stocks  of  private,  foreign  and  domestic 
corporations  being  organized  or  hereafter  organized 
or  proposed  to  be  organized,  for  profit;  *  *  *" 


LAW  OF  OIL  AND  NATURAL  GAS  99 

You  will  note  from  the  foregoing  that  the  caption  covers 
three  classes  of  corporations  or  proposed  corporations : 

(1)  Foreign  and  domestic  corporations  already  char- 
tered but  which  propose  to  increase  their  capital  stock. 

(2)  Proposed  domestic  or  foreign  corporations  being 
organized  but  which  have  not  received  their  charters;  and 

(3)  Proposed  corporations,  that  is,  corporations  which 
may  be  proposed  to  be  organized  after  the  Blue  Sky  Law 
goes  into  effect.  t 

Section  1  of  the  Act  is  not  quite  so  definite  as  the  cap- 
tion and  embraces  the  two  classes  named  above  in  one 
provision,  that  is,  it  classifies  them  as  proposed  cor- 
porations. That  part  of  Section  1,  to  which  it  is  necessary 
to  refer,  reads  as  follows: 

"Every  private  corporation,  foreign  or  domestic, 
organized  for  profit,  which  is  now  attempting  or 
shall  hereafter  attempt  to  increase  its  capital  stock, 
and  every  proposed  corporation  attempted  to  be 
organized,  etc.  *  '  *  *" 

It  is  very  clear,  therefore,  from  the  caption  and  the 
first  section  of  the  Act  that  it  does  not  apply  to  the  sale 
of  the  original  stock  of  either  a  domestic  or  foreign 
corporation  where  such  corporation  was  chartered  before 
the  Blue  Sky  Law  went  into  effect.  However,  if  such 
domestic  or  foreign  corporation  had  not  been  fully 
chartered,  that  is  to  say,  if  it  was  merely  in  a  process 
of  promotion,  or  had  merely  secured  a  permit  to  organize 
a  corporation,  as  is  necessary  in  some  of  the  States,  then 
the  Blue  Sky  Law  would  apply  to  the  sale  of  its  stock  in 
Texas,  except  to  that  portion  of  the  stock  which  had 
already  been  sold  or  which  had  been  contracted  to  be 
sold  prior  to  the  enactment  of  the  Blue  Sky  Law.  The 
exception  is  embraced  within  Section  4  of  the  Blue  Sky 
Law,  and  is,  in  part,  as  follows: 

"Provided,  that  where  any  proposed  corporation 
has  already  sold  its  stock,  or  a  part  thereof,  or  any 


100  LAW  OF  OIL  AND  NATURAL  GAS 

part  thereof  has  been  subscribed  at  the  time  this 
Act  shall  take  effect,  this  Act  shall  not  affect  stock 
previously  sold  or  subscribed  nor  any  contracts  made 
with  reference  to  same;  but  if  any  of  the  stock  of 
said  proposed  corporation  remains  unsold  or  un- 
subscribed, said  corporation  shall,  nevertheless,  be 
entitled  to  a  permit  upon  complying  with  the  other 
conditions  of  this  Act,  including  the  future  sale  or 
subscription  of  any  of  its  stocks.  *  *  *" 

# 

This,  of  course,  means  that  if  the  stock  in  a  proposed 
corporation  is  sold  or  subscribed  for  previous  to  the  en- 
actment of  the  Blue  Sky  Law,  then  such  law  should  not 
apply  to  so  much  of  the  stock  as  was  subscribed  or  sold, 
but  that  the  Blue  Sky  Law  did,  as  to  such  proposed 
corporation,  apply  to  all  unsubscribed  or  unsold  stock  at 
the  time  the  Blue  Sky  Law  went  into  effect. 

It  is  not  very  clear  from  the  letter,  attached  to  your 
communication,  whether  or  not  the  corporation  to  which 
he  refers  had  already  been  chartered  at  the  time  the  Blue 
Sky  Law  went  into  effect.  If  it  had  been  chartered  and 
the  corporation  stock  referred  to  was  the  original  capital 
stock  of  the  corporation,  then,  of  course,  the  sale  of  that 
stock  would  not  be  under  the  Blue  Sky  Law;  but  if  the 
corporation  had  not  been  chartered  but  was  merely  in 
the  process  of  organization,  then  the  Blue  Sky  Law  would 
apply.  In  such  case,  the  mere  fact  that  a  contract  had 
been  made  to  sell  the  stock  of  such  proposed  corporation 
prior  to  the  enactment  of  the  Blue  Sky  Law  would  be 
immaterial,  as  such  contract  would  subordinate  the  right 
of  the  State  to  regulate  the  sale  of  stocks  within  its  boun- 
daries. This  question  would  probably  be  presented  if  the 
corporation  was  already  chartered  and  was  offering  for 
sale  its  capital  stock,  and  it  is  probable  that  the  purpose 
of  the  Legislature  in  writing  the  law  as  written  was  to 
keep  this  suggested  question  from  arising. 


LAW  OF  OIL  AND  NATURAL  GAS  101 

6. 

The  next  question  for  consideration  is  whether  or 
not  promotion  fees,  commissions,  organization  fees,  and 
other  incidental  expenses  incurred  prior  to  the  chartering 
of  the  corporation  may  be  paid  out  of  the  capital  stock  of 
the  corporation,  or  must  such  fees  be  paid  out  of  the 
par  value  of  the  capital  stock  of  the  corporation? 

The  answers  to  this  question  involves  an  examination 
into  two  other  questions: 

(a)  The  nature  of  the  services  rendered  by  the  pro- 
moter, stock  salesman,  or  other  person  bringing  into  ex- 
istence the  corporation  or  selling  its  stcok. 

(b)  The  constitutional  and  statutory  method  of  pay- 
ing in  the  capital  stock  of  corporations  chartered  under 
the  laws  of  Texas. 

We  will  consider  the  questions  in  the  order  named. 

Section  1,  Chapter  32,  General  Laws  of  the  First  Called 
Session  of  the  Thirty-third  Legislature,  appears  to  divide 
the  pre-corporate  expenses  of  a  corporation  into  two 
general  classes.  The  first  class  consists  of  those  expen- 
ditures designated  as  "any  commission,  promotion  or 
organization  fee  or  other  expenses  incident,  directly 
or  indirectly,  to  the  sale  of  its  shares  of  stock,"  and  the 
second  class  is  composed  of  "attorney's  fees,  charter  fees, 
franchise  tax,  permit  fees,  and  stationery  and  supplies." 

It  is  only  those  corporations  in  a  general  way  which 
are  brought  into  existence  by  incurring  the  first  class 
expenditures  that  come  within  the  terms  of  the  Blue  Sky 
Law.  Section  2  of  the  Act  designates  certain  corporations 
which  come  within  the  law,  however,  regardless  of  the 
question  of  incurring  the  expenses  mentioned  in  the 
first  class  designated,  but  it  is  not  necessary  in  this  para- 
graph of  this,  opinion  to  discuss  those  exceptions.  The 
second  class  of  expenses,  it  will  appear,  may  be  incurred 
by  the  corporation,  or  assumed  by  it,  after  its  organiza- 
tion, without  bringing  the  corporation  within  the  terms 
of  the  Blue  Sky  Law.  For  the  purpose  of  convenience 
we  will  designate  all  the  various  expenditures  referred 


102  LAW  OF  OIL  AND  NATURAL  GAS 

to  in  the  first  class  as  taken  from  Section  1  of  the  Act 
as  promotion  fees ;  that  is,  for  the  purpose  of  this  opinion, 
we  describe  commissions,  promotion  fees,  organization 
fees,  and  other  expenses  incident,  directly  or  indirectly, 
to  the  sale  of  shares  of  corporate  stock  as  promotion  fees. 
A  promoter  is  one  who  actively  engages  in  the  financ- 
ing and  organization  of  an  enterprise  under  the  corporate 
form;  promoters  have  been  defined  by  an  eminent  author- 
ity as  persons  who  bring  about  the  incorporation  and 
organization  of  corporations. 

Conyngton  on  Corporate  Organization,  Sec.  225. 
Cook  on  Corporations,  Sec.  650. 
Dickerman  vs.  Northern  Trust  Co.,  176  U.  S.,  203. 
Thompson  on  Corporations,  Sec.  415. 

It  may  be  stated,  therefore,  that  the  purpose  of  the 
promoter  is  to  bring  into  existence  a  corporation,  but 
the  contracts  made  by  him  in  carrying  into  effect  this 
purpose  are  not  contracts  with  the  corporation,  but  only 
contracts  between  the  promoter  and  the  incorporators,  or 
between  the  incorporators  themselves.  The  corporation 
must  have  a  full  and  complete  organization  and  existence 
as  a  legal  entity  before  it  can  enter  into  any  kind  of 
contract  or  transact  any  business.  The  doctrine  which 
obtains  generally  in  the  United  States  and  which  has 
been  adopted  in  Texas  is,  that  engagments  of  promoters  do 
not  bind  the  future  corporation,  unless  the  corporation, 
expressly  or  impliedly,  ratifies  them.  The  corporation 
may,  after  its  creation,  of  course,  ratify  agreements 
which  are  within  its  corporate  powers,  but  the  contract  of 
the  promoter  himself  is  not  the  contract  of  the  corpor- 
ation, and,  therefore,  the  services  rendered  by  him  are 
not  services  for  the  corporation. 

Thompson  on  Corporations,  Sec.  480. 
W.  M.  W.  &  N.  W.  Ry.   Co.  vs.  Granger,   86  Texas, 
352  et  seq. 
Conyngton  on  Corporate  Organization,  Sec,  229. 


LAW  ->F  OIL  AND  NATURAL  GAS  103 

The  Granger  case,  *,apra,  defines  the  status  of  a  pro- 
moter and  the  rights  of  those  contracting  with  him  in 
line  with  the  propositions  just  made  by  us,  and  is  alto- 
gether a  very  clear  and  convincing  opinion  written  by 
Judge  Gaines  while  he  was  Associate  Justice  of  the  Su- 
preme Court  of  this  State.  In  the  opinion  referred  to 
this  rule  is  stated  as  follows: 

"It  is  generally  held,  that  in  the  absence  of  such 
provision  in  the  act  of  incorporation  in  case  of  a 
special  charter,  or  in  the  general  law  or  in  the 
articles  of  incorporation  under  a  general  law,  no 
implied  promise  can  be  imputed  to  a  corporation  to 
pay  for  the  services  of  a  corporator  or  promoter  be- 
fore the  corporation  comes  into  existence.  A  contract 
made  by  promoters  may  be  adopted  by  a  corporation, 
expressly  or  impliedly,  by  exercising  rights  under  it; 
but  otherwise  it  is  not  binding  upon  such  corpora- 
tion." (86  Texas,  356.) 

In  its  opinion  the  court  held  also  that  services  given 
by  an  attorney  in  preparation  of  the  articles  of  incorpora- 
tion which  are  usually  necessary  services,  if  made  under 
a  contract  with  the  promoter,  could  not  be  collected  from 
the  corporation  after  it  was  chartered,  unless  the  cor- 
poration, after  it  came  into  existence,  agreed  to  pay  the 
same.  The  court  said: 

"Such  services  are  usually  necessary,  and  it  would 
seem  that  the  corporation  should  pay  for  them.  Such 
payment  is  frequently  provided  for  in  the  act  of 
incorporation,  or  in  the  articles  when  the  incorpora- 
tion is  effected  under  a  general  law.  When  such 
is  the  case,  persons  who  take  stock  in  the  company 
are  chargeable  with  notice  that  a  liability  for  this 
purpose  has  already  been  created,  and  it  is  proper  for 
the  corporation  to  discharge  it.  But  in  the  absence 
of  such  provision  in  the  statute  or  in  the  articles, 
it  may  be  unjust  to  shareholders  to  charge  the  cor- 


104  LAW  OF  OIL  AND  NATURAL  GAS 

poration  with  liabilities  of  which  they  had  no  actual 
knoivledge  at  the  time  they  accepted  the  shares.  We 
therefore  hold,  with  some  hesitation,  that  claims  for 
the  necessary  expenses  of  the  organization,  under  our 
statute,  should  not  be  excepted  from  the  general  rule 
applicable  to  contracts  made  before  the  corporation 
has  come  into  legal  existence.  (86  Texas,  357.) 

It  would  appear,  therefore,  to  be  settled  law  of  this 
State  that  the  expenditures  heretofore  referred  to  as 
class  1,  described  in  Section  1  of  Chapter  32,  supra, 
and  even  the  attorney's  fees  in  class  2,  described  in  said 
section,  when  such  expenditures  are  incurred  or  authoriz- 
ed by  the  promoters,  or  in  the  promotion  of  the  corpora- 
tion, are  not  in  any  sense  the  liabilities  of  the  corporation, 
unless  adopted  by  the  corporation  after  it  is  chartered, 
and  that  in  all  probability  they  could  not  be  adopted  by 
the  corporation  over  the  protest  of  its  stockholders,  unless 
the  subscription  contracts  contain  a  clause  showing  the 
subscriber  that  such  expenditures  would  be  adopted  by 
the  corporation  with  its  liabilities  after  the  charter  is 
issued.  The  entire  trend  of  authority  would  show,  which 
is  the  proposition  we  here  submit,  that  services  rendered 
prior  to  the  time  the  charter  is  granted  are  services  which 
are  rendered  to  the  incorporators  themselves  and  not  to 
the  corporation  as  such,  and  that  therefore  all  labor  done 
or  money  expended  in  this  direction  is  not  necessarily 
labor  done  for  the  corporation  nor  money  expended  for 
it.  It  is  true  that  there  are  certain  expenses,  such  as 
attorney's  fees,  charter  fees,  franchise  tax,  permit  fees, 
stationery  and  supplies,  which  are  those  expenditures  re- 
ferred to  by  us  as  class  2  of  Section  1  of  the  Act,  which 
are  in  reality  for  the  corporation  and  may  be  adopted 
by  it,  but  the  expenditures  referred  to  as  class  1  of  Sec- 
tion 1  of  the  Act  are  not  expenditures  necessarily  for  the 
corporation. 

(c)  We  will  next  consider  the  constitutional  and  stat- 
utory method  of  paying  in  the  capital  stock  of  corporations 
chartered  under  the  laws  of  this  State. 


LAW  OF  OIL  AND  NATURAL  GAS  105 

The  Constitution  of  this  State  in  Article  12,  Section  6, 
provides : 

"No  corporation  shall  issue  stocks  or  bonds  except 
for  money  paid,  labor  done,  or  property  actually  re- 
ceived, and  all  fictitious  increase  of  stock  or  indebt- 
edness shall  be  void." 

Analyzed,  this  section  of  the  Constitution  means  that 
the  corporation  cannot  issue  its  stock  except  for-:  (1) 
Money  paid  to  the  corporation;  (2)  labor  done  for  the 
corporation;  (3)  property  actually  received  by  the  cor- 
poration. The  courts  have  held  that  the  money  paid  to 
the  corporation  must  not  be  less  than  the  par  value  of 
the  stock  and  that  where  paid  up  stock  of  a  corporation 
has  been  issued  to  subscribers  for  double  the  amount  of 
their  subscription,  they  are  liable  for  the  unpaid  part 
of  their  stock  if  debts  were  contracted  by  the  corporation 
before  they  transferred  the  stock. 

Nenny  vs.  Waddill,  25  S.  W.,  308. 
Mathis  vs.  Pridham,  20  S.  W.,  1015. 
Thompson  on  Corporations,  Sees.  1652,  1653,  1578,  1579, 
1582,   1583,   1685. 

The  term  "paid  up,  non-assessable  stock"  can  only  mean 
stock  that  is  made  non-assessable  by  reason  of  the  fact 
that  the  amount  for  which  it  calls  has  been  fully  paid. 
Street  Railway  Co.  vs.  Adams,  87  Texas,  130. 

The  word  "property,"  as  used  in  the  Constitution,  must 
be  something  substantial;  the  terms  in  which  this  sec- 
tion of  the  Constitution  referred  to  is  expressed  show 
that  it  was  intended  that  the  assets  of  the  corporation 
should  be  something  substantial  and  of  such  a  character 
that  they  could  be  subjected  for  the  payment  of  claims 
against  the  corporation,  as  well  as  to  secure  the  share- 
holders in  their  rights  in  the  capital  stock.  O'Bear- 
Nester  Glass  Co.  vs.  Antiexplo  Co.,  101  Texas,  431. 

The  term  "'money  paid"  is  very  definite  and  plain  and 


106  LAW  OF  OIL  AND  NATURAL  GAS 

does  not  mean  that  stock  can  be  sold  for  money  to  be 
paid,  but  must  be  sold  for  cash.  Of  course,  it  can  be 
paid  for  in  installments,  but  it  must  be  paid  for  in  money, 
or  in  property  actually  received  or  by  labor  actually  per- 
formed for  the  company.  San  Antonio  Irrigation  Co.  vs. 
Deutschmann,  102  Texas,  201. 

It  is  obvious  also  that  the  property  which  the  corpora- 
tion is  authorized  to  receive  in  payment  of  its  stock  must 
be  such  property  as  the  corporation  has  authority  under 
its  charter  to  take  and  hold.  If  the  property  is  not 
necessary  to  the  conduct  of  its  authorized  business,  then 
any  contract  for  its  purchase,  either  for  stock  or  cash, 
is,  unless  expressly  permitted  by  its  charter,  ultra  vires, 
and  stock  issued  therefor  would  not  be  paid  up  stock. 

Conyngton  on  Corporate  Organization,  Sec.  222. 
Powell  vs.  Murray,  3d  Appel.  Div.    (N.  Y.),  273. 
Montgomery  vs.  Brush  El.  Co.,  48  App.  Div.  (N.  Y.),  12. 
Thompson  on  Corporations,  Sees.  1604,  1605,  1606,  1643. 

Mr.  Thompson  in  his  work  thus  states  the  rule: 

"A  corporation  cannot  accept  payment  for  shares  in 
specific  property,  unless  such  property  is  of  a  kind 
which  the  corporation  is  authorized  by  law  to  take 
and  hold.  Thus  a  railway  company  which  is  not  author- 
ized to  receive  and  hold  lands  and  goods  cannot  accept 
payment  for  its  shares  in  lands  or  goods.  (Sec.  1643.) 
*  *  *  And  even  where  the  statute  or  other  govern- 
ing instrument,  by  its  terms,  requires  payment  in 
money,  yet  unless  the  language  is  such  as  to  im- 
port a  prohibition  of  anything  but  money,  the 
courts  are  generally  agreed  that  payment  may  be 
made  in  any  kind  of  property  which  the  corporation 
may  lawfully  purchase  in  the  prosecution  of  its 
business,  provided  it  be  done  in  good  faith.  The 
reason  is  that  the  law  is  practical  in  its  require- 
ments and  does  not  require  the  parties  to  such  a  con- 
tract to  do  the  vain  thing  of  the  subscriber  finding 


LAW  OF  OIL  AND  NATURAL  GAS  107 

money  wherewith  to  pay  his  subscription,  and  the 
corporation  then  handing  the  money  back  to  him 
in  payment  of  property  which  it  desires  to  purchase 
of  him.  That  circumlocution  may  be  avoided,  and 
the  property  may  be  conveyed  directly  in  satisfaction 
of  what  the  subscriber  owes  for  his  shares.  The 
general  rule,  then,  is  that  if  'a  man  contracts  to 
take  shares,  he  must  pay  for  them/  to  use  a  homely 
phrase,  'in  meal  or  in  malt.'  He  must  either  pay 
in  money  or  in  money's  worth;  if  he  pays  in  one 
or  the  other,  that  will  be  a  satisfaction.  He  may 
pay  in  any  kind  of  property  or  services  which  the 
corporation  has  power  to  purchase  for  its  use,  pro- 
vided the  transaction  be  had  in  good  faith  and  the 
property  conveyed  at  a  fair  valuation."  Thompson 
on  Corporations,  Sec.  1605. 

It  will  appear  from  a  consideration  of  these  authorities 
that  the  money  referred  to  in  the  Constitution  must  be 
paid  to  the  corporation;  that  the  property  referred  to 
must  be  such  property  as  the  corporation  can  use  and 
be  delivered  to  the  corporation;  and  it  would  follow,  we 
think,  that  the  labor  to  be  performed,  as  referred  to 
in  the  Constitution,  must  be  labor  performed  for  the 
corporation.  Since  we  have  concluded  that  the  labor 
performed  by  a  promoter  in  promoting  the  corpora- 
tion and  the  expenditures  incurred  by  him  outside 
of  attorney's  fees  and  preparation  of  the  charter,  charter 
fees,  franchise  tax  fees,  permit  fees,  and  stationery  and 
supplies  are  incurred,  not  for  the  corporation  but  for 
the  incorporators,  it  must  follow  that  the  class  of  ex- 
penditures herein  generally  defined  as  promoters  fees,  and 
being  the  first  class  expenditures  referred  to  in  Sec- 
tion 1,  Chapter  32,  supra,  are  not  expenditures  or  services 
for  and  on  behalf  of  the  corporation,  and,  therefore,  can 
form  no  part  of  the  capital  stock  of  the  corporation;  for 
the  reason  that  this  class  of  expenditures  or  service 
are  not  money  paid  to  the  corporation  nor  property  re- 
ceived by  the  corporation  nor  labor  done  for  the  corpora- 


108  LAW  OF  OIL  AND  NATURAL  GAS 

tion,  and  stock,  under  our  Constitution,  could  not  be  issued 
in  payment  therefor. 

It  follows  from  the  foregoing  that  commissions,  pro- 
motion fees,  organization  fees,  and  other  expenses  in- 
cident, directly  or  indirectly,  to  the  sale  of  the  shares 
of  the  capital  stock  of  the  corporation  cannot  be  paid  out 
of  the  par  value  of  the  capital  stock  of  the  corporation; 
and,  if  such  fees  are  paid  by  the  corporation,  then  they 
must  be  paid  by  an  amount  collected  over  and  above  the 
par  value  of  the  capital  stock  of  the  corporation.  At- 
torney's fees,  charter  fees,  franchise  taxes,  permit  fees, 
and  expenditures  for  stationery  and  supplies,  although 
incurred  prior  to  the  filing  of  the  articles  of  incorporation, 
may  be  paid  out  of  the  capital  stock  of  the  corporation 
after  its  charter  is  granted. 

We  believe  that  the  foregoing  answers  substantially 
the  various  questions  propounded  to  us  by  your  de- 
partment. Yours  very  truly, 

C.  M.  CURETON, 
Assistant  Attorney  General. 

This  opinion  has  been  passed  upon,  approved  by  the 
department  in  executive  session,  and  is  now  ordered 
recorded.  B.  F.  LOONEY, 

Attorney  General. 

NOTE. — The  correctness  of  the  conclusions  reached  by  the  Attorney- 
General  on  the  last  point  considered — the  sixth — in  the  foregoing 
opinion,  may  be  questioned.  The  statute  deals  with  the  expenses  of 
promotion,  commissions  on  stock  sales,  etc.,  incurred  before  as  well  as 
after  the  corporation  was  created,  and  apparently  subjects  both  to  th^ 
same  rule.  They  are  limited  in  amount,  are  required  to  be  disclosed 
to  the  purchaser  of  stock,  and  must  be  made  known  to  the  Secretary 
of  State  as  a  prerequisite  for  obtaining-  permit  to  sell  stock.  Before 
the  passage  of  this  Act  such  expenses  incurred  after  incorporation 
were  debts  which  it  could  be  compelled  to  pay  out  of  its  capital.  Those 
incurred  before  incorporation  were  not  its  debts  and  it  could  not 
ordinarily  be  held  for  them.  See  note,  ante,  pp.  25-26.  Also  Weather- 
ford,  etc.,  Ry.  Co.  vs.  Granger,  86  Texas.  350.  But  this  would  hardly 
be  the  case,  even  under  the  above  decision,  where  such  payment  w;is 
contemplated  in  the  original  plan  of  organization,  and  the  stock  pur- 
chased with  distinct  notice  of  this  fact;  and  this  announced  plan  and 
notice  to  purchasers  of  stock  is  secured  by  the  present  statute. 


LAW  OF  OIL  AND  NATURAL  GAS  109 


MINERAL  RIGHTS  IN  LAND— OWNERSHIP,  TRANS- 
FER AND  MINING. 

1. 

WHAT  ARE  MINERALS. 

All  constituents  of  the  earth's  crust,  whether  solid, 
liquid,  or  fluid.  Thus  petroleum  is  a  mineral.  Texas  Co.  vs. 
Daugherty,  Sup.  Ct,  176  S.  W.,  717;  S.  C.  in  Civ.  App., 
160  S.  W.,  129;  Swayne  vs.  Lone  Acre  Oil  Co.,  98  Texas, 
597,  86  S.  W.,  740,  affirming  78  S.  W.,  380;  Southern  Oil 
Co.  vs.  Colquitt,  28  Texas  Civ.  App.,  292;  69  S.  W.,  169. 
And  also  natural  gas.  Texas  Co.  vs.  Daugherty,  Sup. 
Ct.,  176  S.  W.,  717;  S.  C.  in  Civ.  App.,  160  S.  W.,  130;  Ohio 
Oil  Co.  vs.  Indiana,  177  U.  S.,  190;  Westmorland  Etc. 
Nat.  Gas  Co.  vs.  DeWitt,  130  Pa.  St.,  465,  5  L.  R.  A.,  731. 

2. 

OWNERSHIP. 

Like  other  minerals,  oil  and  natural  gas  belong  to  the 
owner  of  the  soil.  Southern  Oil  Co.  vs.  Colquitt,  28 
Texas  Civ.  App.,  292,  69  S.  W.,  169.  They  pass  by  the 
State's  patent  to  its  grantee.  Heil  vs.  Martin,  70  S.  W., 
430;  State  vs.  Parker,  61  Texas,  265.  And  by  the  ordi- 
nary form  of  conveyance  of  title  to  the  land.  But  being 
part  of  the  soil  (Benavides  vs.  Hunt,  79  Texas,  383,  15 
S.  W.,  396)  conveyance  must  be  in  writing.  Rev.  Stats., 
art.  1103.  It  should  be  acknowledged  and  recorded.  Rev. 
Stats.,  art.  6824.  And  where  the  land  is  homestead  the 
wife  must  join  and  make  privy  acknowledgement.  South- 
ern Oil  Co.  vs.  Colquitt,  28  Texas  Civ.  App.,  292,  69 
S.  W.,  169.  Title  to  the  minerals,  such  as  oil  and  gas, 
where  separated  from  that  to  the  soil  by  conveyance,  is 
still  an  interest  in  real  property  and  taxable  as  such. 
Texas  Co.  vs.  Daugherty,  Sup.  Ct.,  176  S.  W.,  717 ;  S.  C.  in 
Civ.  App.,  160  S.  W.,  129. 


110  LAW  OF  OIL  AND  NATURAL  GAS 

But  the  title  of  the  owner  of  the  soil  is  modified  by 
the  peculiar  nature  of  the  mineral  in  the  case  of  petroleum 
and  natural  gas.  He  has  the  exclusive  right  to  seek  them 
in  his  own  soil  and  reduce  them  to  possession.  But  until 
he  has  done  so  he  has  no  recourse  against  any  other  pro- 
prietor who,  by  tapping  the  same  reservoir  by  borings 
on  his  own  land,  draws  them  away  from  their  situs  and 
reduces  them  to  his  own  possession.  Ohio  Oil  Co.  vs. 
Indiana,  177  U.  S.,  190.  The  same  rule  is  recognized 
in  Texas  in  regard  to  subterranean  waters  which  flow 
or  percolate  through  the  soil;  and  it  is  held  that  the 
right  of  any  proprietor  to  draw  them  away  from  the 
land  of  others  into  his  own  wells  is  absolute,  and  not 
subject  to  the  limitation  of  reasonable  use  or  quantity. 
Houston  &  T.  C.  Ry.  Co.  vs.  East,  98  Texas,  146,  81 
S.  W.,  279. 

This  peculiarity  in  the  nature  of  fluid  or  liquid  min- 
erals has  an  important  bearing  on  the  question  of  the 
right  of  the  State  to  regulate  oil  and  gas  wells  (Ohio  Oil 
Co.  vs.  Indiana,  supra)  and  also  upon  the  construction 
and  effect  of  leases  and  contracts  for  mining  them,  as 
will  appear  by  cases  hereafter  cited  on  that  subject. 
The  right  to  such  migratory  and  nomadic  minerals  has 
been  quaintly  likened  by  the  courts  to  that  in  animals 
ferae  naturae,  which  the  proprietor  of  the  land  has  the 
exclusive  privilege  of  hunting  and  capturing  on  his 
own  premises,  but  no  claim  upon  them  when  they  stray 
to  the  lands  of  another.  Ohio  Oil  Co.  vs.  Indiana,  supra. 

But  such  ownership  of  the  oil  and  gas,  when  conveyed 
separately  by  the  owner  of  the  soil  to  another,  though 
under  the  form  of  a  mining  lease  giving  rights  to  pros- 
pect, develop  and  mine  for  a  royalty,  is  not  a  mere 
license  giving  the  grantee  no  interest  in  the  minerals  till 
mined  and  reduced  to  possession,  but  a  grant  to  an  inter- 
est in  the  land,  and  taxable  by  the  State  as  such.  Texas 
Co.  vs.  Daugherty,  Sup.  Ct,  176  S.  W.,  717;  S.  C.  in  Civ. 
App,.  160  S.  W.,  129. 


LAW  OF  OIL  AND  NATURAL  GAS  111 

JOINT  OR  COMMON  OWNERS. 

Tenants  in  common  being  equally  entitled  to  the  pos- 
session and  use,  either  may  open  and  work  mines,  or 
convey  to  others  his  right  to  do  so.  But  this  is  subject  to 
the  rights  of  his  cotenant  who  would  be  entitled  to  his 
proportion  of  the  proceeds  after  deducting  the  cost  of 
production.  Swayne  vs.  Lone  Acre  Oil  Co.,  85  Texas, 
597,  86  S.  W.,  740,  affirming  Lone  Acre  Oil  Co.  vs.  Swayne, 
78  S.  W.,  380.  But  where  such  cotenancy  was  only  to 
the  extent  of  a  life  interest,  and  without  the  right  to 
mine  (which  would  be  to  commit  waste,  and  be  permis- 
sible to  the  life  tenant  only  where  his  estate  was  created 
by  deed,  not  where  created  by  operation  of  law,  as  by 
inheritance)  such  life  tenant  would  have  no  interest  in 
the  product  of  the  mines.  Swayne  vs.  Lone  Acre  Oil  Co., 
95  Texas,  597,  86  S.  W.,  740. 

TENANTS   FOR  YEARS. 

The  ordinary  tenant  for  years,  unless  rights  to  minerals 
were  specificially  conferred  by  his  lease,  has  no  right 
to  open  mines  or  confer  mining  rights  on  others,  since 
he  has  no  right  to  commit  waste.  Swayne  vs.  Lone  Acre 
Oil  Co.,  supra. 

OWNERS   OF  EASEMENTS. 

One  who  owns  a  mere  easement,  or  right  of  way  over 
land,  has  no  right  to  its  minerals  and  can  convey  none.  Thus 
a  city  could  not  sink  wells  in  its  public  streets  to  obtain  a 
supply  of  water,  where  the  title  to  the  fee  was  in  an  adjoin- 
ing lot  owner.  O'Neal  vs.  City  of  Sherman,  77  Texas,  182, 
14  S.  W.,  31.  This  case  followed  Dubuque  vs.  Benson, 
23  Iowa,  248,  a  case  of  mining  lead  in  the  street.  A 
different  ruling  was  made  in  that  State  in  a  case  of  a 
coal  mine  where  the  fee  to  the  street  was  in  the  city. 
Des  Moines  vs.  Hall,  24  Iowa,  234.  So  it  has  been  held 
that  a  railway  company  could  confer  no  right  to  mine  for 


112  LAW  OF  OIL  AND  NATURAL  GAS 

oil  on  land  over  which  it  had  a  mere  right  of  way,  not 
owning  the  fee.  Right  of  Way  Oil  Co.  vs.  Gladys  City 
Oil  G.  &  M.  Co.,  106  Texas,  -  — ,  157  S.  W.,  737,  affirm- 
ing Gladys  City  Oil  G.  &  M.  Co.,  vs.  Right  of  Way  Oil 
Co.,  137  S.  W.,  171;  and  this  though  the  deed  con- 
veying the  right  of  way  granted  "for  the  purpose  of  con- 
structing, maintaining  and  operating  its  railroad"  the 
right  to  take  and  use  all  "timber,  stone,  earth  and  min- 
erals" found  within  the  right  of  way  granted.  This  was 
held  to  refer  ouly  to  surface  minerals,  not  to  oil,  though 
the  introduction  of  oil  burning  engines  had  rendered 
that  mineral  useful  in  operating.  (Id.)  Conveyances 
of  land  bounded  on  stieets,  alleys  or  public  roads  carry 
title  to  the  center  of  such  highway,  if  the  grantor  so 
owns.  Cocke  vs.  Texas  &  N.  0.  Ry.  Co.,  46  Texas  Civ. 
App.,  303,  103  S.  W.,  407;  Wiess  vs.  Goodhue,  46  Texas 
Civ.  App.,  142,  102  S.  W.,  793;  Day  vs.  Chambers,  62 
Texas,  190;  Mitchell  vs.  Bass,  26  Texas,  372.  But  other- 
wise as  to  boundary  on  right  of  way  of  railway.  Couch 
vs.  Texas  &  P.  Ry.  Co.,  99  Texas,  464,  90  S.  W.,  860. 

RIVERS   AND  BAYS. 

Riparian  proprietors  on  seas  or  bays,  and  on  tide 
water  streams,  hold  only  to  line  of  ordinary  high  tide. 
Galveston  vs.  Menard,  23  Texas,  349;  Galveston  C.  S. 
Bathing  Co.  vs.  Heidenheimer,  63  Texas,  559 ;  Roseborough 
vs.  Picton,  12  Texas  Civ.  App.,  113,  34  S.  W.,  791;  De- 
Merit  vs.  Robison,  102  Texas,  358,  116  S.  W.,  796.  The 
same  rule  applies  to  streams  not  navigable  at  common 
law,  but  declared  so  by  statute;  that  is,  those  retaining  an 
average  width  of  thirty  feet  (Rev.  Stats.,  art.  5338). 
The  rights  of  riparian  proprietors  theron  end  at  the 
water  line,  and  the  State  retains  title  to  the  bed  of  the 
stream.  City  of  Austin  vs.  Hall,  93  Texas,  591,  57  S.  W., 
563.  The  State  has  made  provision  for  sale  of  its  mineral 
lands  (Rev.  Stats.,  arts.  5904-5922).  But  these  laws  do 
not  apply  to  or  permit  sale  of  a  tract  on  the  coast,  part 
of  a  shallow  bay  covered  by  the  flow  of  the  tide  but  bare 


LAW  OF  OIL  AND  NATURAL  GAS  113 

at  ebb.  DeMerit  vs.  Robison,  102  Texas,  358,  116  S.  W., 
796.  Presumably  this  decision  would  be  followed  as  to 
the  beds  of  streams  navigable  by  statute.  The  State  was 
held  entitled  to  grant,  by  special  act,  land  under  a  tide 
water  bayou.  Baylor  vs.  Tillebach,  20  Texas  Civ.  App., 
490,  49  S.  W.,  720.  But  its  grant  is  not  presumed  to  have 
that  effect.  Roseborough  vs  Picton,  12  Texas  Civ.  App., 
34  S.  W.,  791.  And,  as  shown  above,  such  grants  are  not 
authorized  by  its  general  laws.  But  as  to  what  rights  the 
public  may  exercise  while  the  title  to  the  bed  of  a  stream 
remains  in  the  public  (in  this  case  taking  gravel)  see  Goar 
vs.  City  of  Rosenburg,  53  Texas  Civ.  App.,  218,  115  S.  W., 
653. 

3. 

SEPARATION    OF    MINERAL    RIGHTS    FROM    TITLE    TO    SOIL   BY 
SALE  OR  LEASE. 

The  title  to  the  minerals  may  be  separated  from  the 
general  title  to  the  soil  by  transfer  by  its  owner  of  the 
minerals  only.  But  while  they  remain  in  the  soil  they  still 
constitute  real  property.  Staley  &  Barnsdall  vs.  Derden,  121 
S.  W.,  1136 ;  Texas  Co.  vs.  Daugherty,  Sup.  Ct,  176  S.  W., 
717.  And  can  only  be  conveyed  in  such  manner  as  the  land 
itself,  that  is  by  deed  in  writing.  Benevides  vs.  Hunt,  79 
Texas,  15  S.  W.,  396.  Where  the  land  is  homestead  the 
wife  must  join  and  privily  acknowledge  a  conveyance 
of  the  mineral  rights.  Southern  Oil  Co.  vs.  Colquitt,  28 
Texas  Civ.  App.,  292,  69  S.  W.,  169. 

ABSOLUTE   SALE. 

The  transfer  may  be  by  an  absolute  and  unconditional 
sale  of  the  mineral  rights  by  the  proprietor  of  the  soil 
for  a  fixed  price.  In  such  case  the  purchaser  is  under 
no  obligation  to  develop  the  mineral  resources  of  the 
land;  and,  on  the  other  hand,  may  be  compelled  to  pay 
the  purchase  money  whether  any  oil  is  found  or  not,  as 
was  ruled  in  Whited  vs.  Johnson,  167  S.  W.,  812,  where 


114  LAW  OF  OIL  AND  NATURAL  GAS 

the  contract  was  to  pay  $10,000  for  "all  of  the  oil,  gas, 
coal  and  sulphur  in  and  under"  the  tract  "that  may  be 
found  by  drilling  and  mining  operations  which  may  here- 
after be  conducted  on  said  land." 

CONDITIONAL   CONTRACTS   AND   LEASES. 

A  more  common  form  of  contract  for  mineral  rights 
is  that  of  a  sale  or  lease  for  a  term  of  years  in  which 
the  proprietor  retains  an  interest  in  the  development, 
usually  by  way  of  a  royalty,  or  proportion  of  the  net 
proceeds  of  the  mining  to  be  conducted  by  the  lessee. 
Such  agreements  are  upon  conditions  either  expressed  in 
or  implied  from  the  contract.  Where  there  is  an  ex- 
press promise  as  to  the  things  to  be  done  by  the  lessee 
he  forfeits  his  rights  by  failure  to  perform,  though  such 
performance  was  not  the  sole  consideration.  Where  there 
is  no  express  promise  to  develop,  or  perform  any  par- 
ticular work,  but  the  sole  or  principal  consideration  is 
the  development  of  mineral  rights  and  payment  of  royal- 
ties to  the  lessor  from  the  product  of  the  well,  there  is 
an  implied  undertaking  by  the  lessee  to  prosecute  pros- 
pecting and  mining  with  reasonable  diligence  and  he  for- 
feits his  rights  by  failure  to  do  so.  Numerous  cases  in 
Texas  illustrate  the  application  of  these  principles. 

Thus  in  Emery  vs.  League,  31  Texas  Civ.  App.,  474,  72 
S.  W.,  603,  in  which  writ  of  error  was  refused,  the 
consideration  was  $10  paid,  and  agreement  to  prospect 
and  develop  and  pay  lessor  12  1-2  per  cent  of  gross 
output.  The  lease  was  from  a  tenant  in  common  with 
others  and  the  lessee  was  to  secure  partition  before  com- 
mencing operations,  which  were  to  be  on  the  lessor's 
part.  He  also  reserved  the  right  to  abandon  operations 
if  found  unprofitable.  It  was  held  that  this  was  a  mere 
unilateral  or  option  contract;  the  lessee  acquired  no 
rights  until,  within  a  reasonable  time,  he  commenced 
performance;  he  having  failed  to  even  secure  the  neces- 
sary partition,  the  lessor  was  entitled  to  cancellation  of 
the  lease. 


LAW  OF  OIL  AND  NATURAL  GAS  115 

Where  the  contract  is  unilateral  or  optional,  time  is  of 
the  essence  of  the  contract.  Presidio  Mining  Co.  vs. 
Bullis,  68  Texas,  581,  4  S.  W.,  860. 

Where  the  undertaking  of  the  lessee  was  to  develop 
within  six  months,  as  a  condition  of  acquiring  rights,  a 
paying  well,  the  contract  defining  that  term  as  one  which 
produced  a  stated  number  of  barrels  per  day,  and  he 
brought  in  a  well  producing  oil  in  paying  quantities,  but 
to  a  less  amount,  there  was  no  performance  and  he  for- 
feited his  rights.  McLean  vs.  Kishi,  173  S.  W.,  502. 

In  Hodges  vs.  Brice,  32  Texas  Civ.  App.,  358,  74  S.  W., 
590,  consideration  of  $4  was  recited  but  the  principal 
consideration  was  the  lessee's  promise  to  develop,  and  to 
commence  boring  a  well  in  six  months.  He  failed  to  do 
anything  for  several  years,  and  it  was  held  that  he  ac- 
quired no  rights  and  had  no  interest  requiring  him  to 
be  made  a  party  to  a  suit  to  foreclose  a  lien  on  the  land. 

In  Roberts  &  Corley  vs.  McFadden,  Weiss  &  Kyle,  32 
Texas  Civ.  App.,  47,  74  S.  W.,  105  (writ  of  error  re- 
fused) there  was  no  consideration  for  a  lease  of  oil 
rights  other  than  the  lessee's  agreement  to  develop.  But 
it  was  provided  that  he  could  terminate  the  lease  at 
any  time.  This  was  held  a  unilateral  contract,  a  mere 
option,  under  which  he  acquired  no  rights  till  perform- 
ance. It  did  not  cast  a  cloud  on  lessor's  title;  he  might 
annul  it  at  any  time;  and  he  did  so  by  selling  the  land 
to  another  prior  to  any  performance.  Similarly  in  J.  M. 
Guffey  Pet.  Co.  vs.  Oliver,  79  S.  W.,  884,  a  lease  which 
was  terminable  at  the  will  of  the  lessee  on  payment  of  $4. 
was  held  terminable  by  the  lessor  also,  to  whom  no  such 
right  was  expressly  reserved,  on  repaying  the  cash  con- 
sideration paid  and  compensating  the  lessee  for  expend- 
itures made.  See  also  Owens  vs.  Texarkana  Pet.  Co., 
169  S.  W.,  192,  post. 

In  National  Oil  &  Pipe  Line  Co.  vs.  Teel,  95  Texas, 
591  (in  Ct.  of  Civ.  App.,  67  S.  W.,  545,  where  contract 
is  given  in  full)  the  proprietor  sold  the  mineral  rights 
for  an  interest  in  the  mined  product,  the  grantee  under- 
taking to  drill  within  two  years,  and,  failing  that,  having 


116  LAW  OF  OIL  AND  NATURAL  GAS 

the  right  to  prevent  forfeiture  by  paying  a  yearly  rental 
of  $100.  This  was  held  to  be  unilateral,  giving  the 
grantee  no  interest  in  the  minerals  but  a  mere  option  or 
right  to  acquire  such  interest  by  performance.  This  be- 
ing a  mere  equitable  right,  even  if  supported  by  an  in- 
dependent consideration,  an  assignee  took  it  subject  to  any 
defense  the  grantor  had  against  the  grantee,  such  as 
fraud  in  procuring  the  contract. 

Somewhat  similar  was  the  case  of  Witherspoon  vs. 
Staley,  156  S.  W.,  557  (writ  of  error  refused).  The  oil 
rights  were  conveyed  for  $25  and  royalties  to  be  paid. 
It  was  to  be  forfeited  if  operations  were  not  commenced 
in  six  months;  but  this  the  grantee  could  prevent  by  pay- 
ing $25  every  sixty  days.  He  was  not  bound  to  do  either. 
This  .was  held  unilateral  and  a  mere  option;  being  op- 
tional as  to  one  it  was,  while  unperformed,  optional  as 
to  both;  so  the  grantor  could  refuse  to  keep  it  alive  by 
accepting  further  payments  when  no  work  had  been  done. 

Distinguishable  from  the  foregoing  case  is  the  earlier 
one  of  Great  Western  Oil  Co.  vs.  Carpenter,  43  Texas 
Civ.  App.,  229,  95  S.  W.,  57  (writ  of  error  refused). 
This  was  an  oil  and  gas  lease  for  royalties;  the  lessee 
undertook  to  sink  a  well  in  a  given  time,  but  was  en- 
titled to  prevent  forfeiture  for  failure  by  renewing  lease 
for  another  year  on  payment  of  10  cents  per  acre  rental. 
This  was  held  not  unilateral  since  the  performance  of 
his  undertaking  was  not  optional  with  the  lessee,  as  in 
the  cases  of  Hodges  vs.  Brice,  Emery  vs.  League,  Roberts 
vs.  McFadden,  and  Oil  Co.  vs.  Teel,  supra,  which  are  all 
distinguished. 

Forney  vs.  Ward,  25  Texas  Civ.  App.,  443,  62  S.  W., 
108,  involved  the  question  of  what  would  be  a  commence- 
ment of  drilling,  where  time  therefor  was  limited  by  the 
terms  of  the  lease.  It  was  held  a  question  of  fact.  The 
lessee  had  done  nothing  but  haul  lumber  onto  the  prem- 
ises for  the  erection  of  a  derrick,  on  the  last  day  allowed 
for  beginning. 


LAW  OF  OIL  AND  NATURAL  GAS  117 

IMPLIED  OBLIGATION  TO  DEVELOP. 

In  J.  M.  Guffey  Petroleum  Company  vs.  Oliver,  79 
S.  W.,  884  (writ  of  error  refused)  it  was  held  that 
a  lease  for  mining  oil  and  natural  gas  in  consider- 
ation of  royalties  to  the  lessor,  was  on  an  implied 
condition  of  diligence,  good  faith  and  reasonable  develop- 
ment, and  could  be  forfeited  for  lessee's  failure  therein. 

The  foregoing  case  cites  and  follows  Benavides  vs.  Hunt, 
79  Texas,  383,  15  S.  W.,  396,  which  was  a  lease  of  right 
to  mine  coal,  giving  lessor  one-third  of  the  net  profits.  It 
was  there  held  that,  though  there  was  no  express  agree- 
ment by  the  lessee  to  operate  the  mine  if  discovered, 
such  promise  was  implied  in  case  coal  was  found  which 
could  be  mined  at  a  profit. 

In  J.  M.  Guffey  Pet.  Co.  vs.  Jeff  Chaison  Townsite  Co., 
48  Texas  Civ.  App.,  555,  107  S.  W.,  609,  the  lessee  had 
sunk  a  paying  well  on  the  property,  and  was  under  no 
express  contract  to  sink  others.  But  it  was  held  to  be 
his  duty  to  use  reasonable  diligence  and  care  to  protect 
the  property  against  the  drawing  off  the  supply  of  oil 
by  other  wells  upon  adjoining  tracts,  and  to  sink  ad- 
ditional wells  on  the  property  for  this  purpose,  if  neces- 
sary. The  suit  sought  damages,  not  forfeiture,  for  this 
default. 

Owens  vs.  Corsicana  Pet.  Co.,  169  S.  W.,  192.  The  land 
was  leased  for  years  for  the  production  of  oil,  gas  and 
coal,  in  consideration  of  $28.20  cash  and  of  a  royalty  of 
one-eighth  to  the  lessor.  The  lessee  was  to  bore  a  well 
in  one  year  or  to  pay  a  quarterly  rental  of  $28.20,  and 
could  terminate  the  lease  at  any  time  by  paying  $5,  the 
lessor  disclaiming  any  right  to  terminate  the  lease  him- 
self on  account  of  this  provision.  Held  that  the  $5  to  be 
paid  for  surrender  of  the  lease  was  a  merely  nominal  con- 
sideration. The  contract  was  unilateral  and  a  mere  op- 
tion. If  terminable  by  one  party  it  was  terminable  by 
the  other.  The  lessee  drilled  no  well  on  the  land,  but 
sunk  wells  on  tracts  adjoining  it  upon  three  sides,  thus 
drawing  off  the  supply  from  this  land.  The  lessor,  it 


118  LAW  OF  OIL  AND  NATURAL  GAS 

was  held,  could  refuse  the  quarterly  rent  tendered  and 
forfeit  the  lease.  The  primary  consideration  was  to  ob- 
tain for  the  lessor  the  advantage  of  development  and  the 
lessee  was  bound  to  use  diligence  therein.  Nearly  all 
Texas  authorities  are  reviewed  and  followed  or  distin- 
guished. But  writ  of  error  was  granted  in  this  case  and 
it  is  now  pending  (Cor.  Pet.  Co.  vs.  Owens)  in  Supreme 
Court. 

EFFECT  OF  COMPLIANCE  BY  LESSEE. 

It  has  already  appeared  that  a  contract  purporting  to 
convey  to  the  lessee  the  right  to  oil  under  the  land  and 
to  sink  wells  and  take  it  therefrom,  if  it  is  not  an  absolute 
sale,  as  in  Whited  vs.  Johnson,  167  S.  W.,  812,  noted 
above,  but  one  where  the  lessee  or  grantee  is  to  mine  on 
payment  of  royalties,  has  been  held  to  confer  upon  him 
no  title  to  the  oil  itself,  but  only  a  right  to  acquire  title 
by  performing  the  express  or  implied  obligations  of  the 
contract  on  his  part  (Emery  vs.  League,  Hodges  vs. 
Brice,  Roberts  &  Corley  vs.  McFadden,  Weiss  &  Kyle, 
National  Oil  &  Pipe  Line  Co.  vs.  Teel,  and  other  cases 
ante.  But  compare  Texas  Co.  vs.  Daugherty,  Sup  Ct., 
176  S.  W.,  717.)  We  should  rather,  perhaps,  to  be  accur- 
ate, recognize  three  classes  of  these  transfers:  (1)  an 
absolute  sale  of  the  mineral  rights;  (2)  a  transfer  of  a 
present  right  to  the  minerals,  but  on  conditions  subse- 
quent, under  which  the  grantee  forfeits  his  rights  by 
failure  to  perform  them;  (3)  transfers  giving  no  present 
right  to  the  minerals,  but  a  right  to  acquire  title  to  them 
by  performance  of  certain  conditions.  Of  the  first  class  is 
Whited  vs.  Johnson,  supra;  of  the  second,  Texas  Co.  vs. 
Daugherty,  supra;  of  the  third,  National  Oil  &  P.  L.  Co. 
vs.  Teel,  supra.  But  whether  the  conveyance  be  of  the 
second,  or  of  the  third  class,  where  the  grantee  has  per- 
formed all  that  was  required  of  him  under  the  con- 
tract, he  then  acquires  an  interest  in  the  oil  under  the 
land. 

Thus,  a  lessee  who  was  bound  by  his  contract  to  sink 


LAW  OF  OIL  AND  NATURAL  GAS  119 

a  well  within  a  certain  time  did  so  and  it  proved  not  a 
paying  well.  In  that  event  his  contract  gave  him  the 
right  to  sink  other  wells  but  did  not  require  him  to  do 
so.  He  did  not  drill  any  others;  but  the  lessor  did  and 
obtained  a  paying  well.  It  was  held  that  the  lessee  was 
entitled  to  his  proportion,  under  the  contract,  of  the 
yield  of  this  well  less  the  expenditures  of  the  lessee  in 
its  production.  O'Neil  vs.  Sun  Co.,  123  S.  W.,  172.  Writ 
of  error  refused. 

A  lessee  drilled  a  well  and  obtained  oil  in  paying 
quantities.  He  drilled  two  others  which  were  failures. 
His  contract  did  not  bind  him  to  do  more.  The  first 
well,  after  it  had  been  pumped  for  some  time,  with  due 
payment  of  royalties,  ceased  to  be  profitable,  and  he 
abandoned  its  operation  and  sunk  no  more  wells.  The 
lessor  sued  to  cancel  his  lease.  It  was  held  that,  having 
performed  all  the  contract  required  of  him  he  acquired 
rights  to  the  oil  under  his  lease  for  its  full  term  of  20 
years,  and  it  could  not  be  forfeited  because  he  abandoned 
work.  McAfee  vs.  Grubb,  164  S.  W.,  925,  following 
O'Neil  vs.  Sun  Co.,  supra.  But  writ  of  error  was  granted 
in  this  case,  and  it  is  now  pending  (Grubb  vs.  McAfee) 
in  Supreme  Court. 

A  lessee  corporation  which  had  agreed  to  compromise 
a  suit  for  cancellation  of  its  lease,  consenting  to  such 
cancellation,  could  not  avoid  such  agreement  by  showing 
that  it  had  previously  given  another  an  option  to  pur- 
chase the  lease,  or  that  the  controlling  interest  in  its 
stock  had  changed  hands  since  the  agreement.  Southern 
Oil  Co.  vs.  Wilson,  22  Texas  Civ.  App.,  534,  56  S.  W., 
429. 

It  is  evident  that  some  confusion  still  exists  in  the 
rulings  of  the  appellate  courts  as  to  the  construction  and 
effect  of  transfers  or  leases  of  mineral  rights.  It  is  to 
be  hoped  that  the  subject  may  be  cleared  up  by  the  de- 
cisions of  the  Supreme  Court  in  the  cases  of  Grubb  vs. 
McAfee  and  Corsicana  Pet.  Co.  vs.  Owens,  which  are 
still  before  that  court  on  writ  of  error  granted. 


120  LAW  OF  OIL  AND  NATURAL  GAS 

OPTIONS  AND  UNILATERAL  CONTRACTS. 

A  contract  by  which  the  owner  of  property  agrees  with 
another  person  that  he  shall  have  the  right  to  buy  the 
property  at  a  fixed  price  within  a  certain  time,  is  an  op- 
tion; and,  if  based  upon  a  valuable  consideration,  such 
contract  is  binding  and  may  be  enforced.  Williams  vs. 
Graves,  7  Texas  Civ.  App.,  366,  26  S.  W.,  334.  But  time 
is  of  the  essence  of  the  contract,  and  the  vendee  must 
comply  with  the  conditions  of  his  purchase  within  the 
period  limited.  Johnson  vs.  Portwood,  89  Texas,  245,  34 
S.  W.,  596 ;  Washington  vs.  Rosario  Mining,  Etc.,  Co.,  28 
Texas  Civ.  App.,  430,  67  S.  W.,  459;  Killough  vs.  Lee,  2 
Texas  Civ.  App.,  262,  21  S.  W.,  970;  Viser  vs.  Rice,  33 
Texas,  139. 

As  to  whether  the  payment  or  recital  of  payment  of  a 
merely  nominal  consideration,  such  as  one  dollar,  will 
support  such  a  contract,  see  National  Oil  &  P.  L.  Co.  vs. 
Teel,  95  Texas,  586,  68  S.  W.,  979,  affirming  67  S.  W.,  545; 
Great  Western  Oil  Co.  vs.  Carpenter,  43  Texas  Civ.  App., 
229,  95  S.  W.,  57 ;  Cobb  vs.  Beall,  1  Texas  342,  347 ;  Davis 
vs.  Turner,  26  Texas,  98. 

A  promise  may  furnish  valuable  consideration  for  a 
promise.  But  it  must  be  an  absolute  agreement;  and  if 
performance  of  the  undertaking  of  either  party  is  only 
optional  with  him,  it  alone  will  not  supply  a  consideration 
for  the  other's  contract.  In  such  case,  both  must  be  bound 
or  neither  will  be.  James  vs.  Fulcrod,  5  Texas,  519;  Ar- 
nold vs.  Chamberlain,  14  Texas  Civ.  App.,  634,  39  S.  W., 
201;  Lane  &  Saylor  vs.  Scott  &  Culver,  57  Texas,  367; 
Williams  vs.  Graves,  7  Texas  Civ.  App.,  365,  26  S.  W.,  334. 

But  if  an  independent  valuable  consideration  sufficient 
to  support  the  contract  has  been  paid,  the  fact  that  fur- 
ther undertakings  by  the  purchaser  were  not  absolute 
but  merely  things  which  were  to  be  done  at  his  option, 
would  not  render  the  contract  void  as  being  an  option 
or  unilateral  contract  without  consideration.  If  the  mat- 
ters left  optional  with  him  were  conditions  to  his  acquir- 
ing or  retaining  the  rights  granted,  either  expressly  or 


LAW  OF  OIL  AND  NATURAL  GAS  121 

by  implication,  he  might  forfeit  his  rights  by  failure  to 
perform,  but  the  question  becomes  then  one  of  forfeiture 
of  a  conditional  grant,  rather  than  of  the  validity  of  an 
optional  or  unilateral  contract.  This  distinction  may 
not  always  have  been  kept  in  mind  in  the  language  of 
the  decisions  above  reviewed.  Compare:  Presidio  Min- 
ing Co.  vs.  Bullis,  68  Texas,  581,  4  S.  W.,  860;  Emery  vs. 
League,  31  Texas  Civ.  App.,  474,  72  S.  W.,  603;  Roberts 
&  Corley  vs.  McFadden,  Weiss  &  Kyle,  32  Texas  Civ.  App., 
47,  74  S.  W.,  105;  National  Oil  &  P.  L.  Co.  vs.  Teel,  95 
Texas,  586,  68  S.  W.,  979;  S.  C.,  67,  S.  W.,  545;  Wither- 
spoon  vs.  Staley,  156  S.  W.,  557;  Great  Western  Oil  Co. 
vs.  Carpenter,  43  Texas  Civ.  App.,  229,  95  S.  W.,  57; 
Owens  vs.  Corsicana  Pet.  Co.,  169  S.  W.,  192. 

The  suggestion  may  be  ventured  that  the  fact  that  the 
purchaser  is  not  bound  to  complete  the  performance  which 
would  give  him  title,  does  not  render  his  contract  either 
void  or  voidable,  if  there  is  a  consideration  to  support  it 
other  than  such  performance.  And  this  would  be  true 
although  the  performance  was  the  main  consideration 
moving  the  seller  or  lessor  to  enter  into  the  contract.  The 
fact  that  it  was  the  main  consideration  would,  however, 
have  an  important  bearing  upon  the  time  and  circum- 
stances under  which  the  grantor  would  be  entitled  to 
treat  the  grantee's  contract  as  forfeited  by  his  non-com- 
pliance with  the  conditions.  Though  the  existence  of  a 
valuable  independent  consideration  might  suffice  to  sup- 
port an  optional  contract,  that  is  a  grant  conditioned  on 
subsequent  performance  by  the  grantee  of  things  which 
he  is  left  free  to  perform  or  not,  the  time  for  exercising 
an  option,  as  has  already  appeared,  must  be  fixed  and 
reasonable,  and  its  reasonableness  might  depend  on  the 
subject  matter  dealt  with  and  the  attendant  circumstances. 
This  consideration  might  have  some  bearing  on  a  case 
like  that'  of  Owens  vs.  Corsicana  Pet.  Co.,  above  men- 
tioned, where  the  lessee  postpones  development  by  paying 
the  alternative  rental,  and  meanwhile  draws  off  the  oil 
into  his  wells  on  adjoining  land. 

This  subject  has  recently  been  considered  by  the  Su- 


122  LAW  OF  OIL  AND  NATURAL  GAS 

preme  Court  of  the  United  States  in  Guffey  vs.  Smith, 
(April  5,  1915)  35  Sup.  Ct.  Reporter,  526,  237  U.  S.,  101, 
reversing  Smith  vs.  Guffey,  120  C.  C.  A.,  436,  202  Fed., 
106.  The  court  hold  the  lease  (similar  to  that  in  the 
Owens  case,  supra)  not  voidable  by  the  lessor,  though  a 
right  to  terminate  it  was  reserved  to  the  lessee, — follow- 
ing the  rule  of  property  established  by  the  decisions  in 
Illinois,  where  the  case  originated.  The  lessee  was  held 
entitled  to  injunction  against  mining  operations  by  the 
lessor  or  a  subsequent  lessee  from  him,  and  to  an  account- 
ing for  the  profits  already  accruing  therefrom. 

The  decision  turned  upon  the  question  whether  such 
an  optional  right  to  terminate,  reserved  to  the  lessee, 
though  conceded  not  to  create,  at  law,  a  tenancy  at  will 
terminable  by  the  lessor  also,  was  so  inequitable  and  lack- 
ing in  mutuality  as  to  preclude  the  lessee  from  maintain- 
ing the  action  for  equitable  relief  by  injunction.  The 
court  held  that  it  was  not,  and  awarded  the  lessee  such 
relief,  refusing,  in  this,  to  follow  rulings  of  the  Supreme 
Court  of  Illinois  to  the  contrary. 

This  decision  and  the  numerous  cases  cited  therein 
and  in  briefs  of  counsel  afford  a  good  starting  point  for 
investigating  the  result  of  the  rulings  in  other  states  upon 
this  and  related  questions  growing  out  of  such  leases. 
They  are  numerous  and  not  harmonious;  and  a  review  of 
them  is  beyond  the  scope  of  this  work,  which  is  not  de- 
signed to  go  beyond  a  statement  of  the  law  as  adjudged 
in  Texas. 

CONTRACTS   FOR   OPERATION. 

Concerning  contracts  other  than  those  between  .the 
owner  of  the  soil  and  his  grantee  or  lessee,  a  few  decisions 
may  be  noted: 

An  oil  company  has  been  held  entitled  to  lease  to  an- 
other its  real  property,  though  it  has  itself  begun  mining 
thereon,  to  be  operated  for  it  by  the  lessee  for  a  royalty. 
-  Stark  vs.  Guffey  Pet.  Co.,  80  S.  W.,  1080. 

A  contract  by  one  oil  company  to  operate  the  well  of 
another,  and  to  take  out  and  pay  for  a  fixed  amount 


LAW  OF  OIL  AND  NATURAL  GAS  123 

monthly,  was  for  the  protection  of  the  owning  company 
from  loss  by  exahustion  of  the  supply  by  others.  Its  of- 
fer to  take  out  and  pay  for  the  same  amount  subsequently 
did  not  cover  this.  And  an  agreement  for  the  cancella- 
tion of  the  lease  did  not  relieve  it  from  the  liability  pre- 
viously incurred  in  operating  under  it.  Alabama  Oil,  Etc., 
Co.  vs.  Sun  Co.,  99  Texas,  606,  92  S.  W.,  253,  reversing 
90  S.  W.,  202. 

An  oil  company  contracted  to  supply  fuel  oil  to  certain 
industries,  but  it  was  to  be  relieved  from  its  undertaking 
in  case  of  "failure  of  oil  wells."  Under  the  circumstances 
shown  this  was  construed  to  mean  failure  of  their  own 
wells  to  flow  by  natural  pressure.  They  were  not  bound 
to  continue  the  supply,  at  the  terms  named,  when  they 
could  obtain  it  from  their  wells  only  by  pumping.  San  Ja- 
cinto  Oil  Co.  vs.  Ft.  Worth,  Etc.,  Power  Co.,  41  Texas 
Civ.  App.,  293,  93  S.  W.,  173. 

A  contract  for  drilling  an  oil  well,  with  provision  for 
the  proprietor  continuing  the  work  after  the  contractor 
abandoned  it,  was  construed  in  Hammond  vs.  Decker,  102 
S.  W.,  453. 

4.      MINERAL  RIGHTS  IN  PUBLIC  LANDS. 

The  United  States  acquired  no  title  to  the  public  lands 
of  Texas  by  its  admission  to  the  Union.  Articles  of  An- 
nexation, Sayle's  Early  Laws,  Vol.  1,  Art.  1531.  Conse- 
quently the  mining  laws  of  the  Federal  Government,  ap- 
plicable only  to  its  own  lands,  are  not  in  effect  here.  The 
acquisition  of  mineral  lands  and  mining  rights  in  Texas  is 
regulated  by  its  own  laws.  Revised  Statutes,  Articles 
5904-5922,  ante.  The  ownership  of  minerals  in  the  soil 
underlying  bays  and  navigable  streams  has  been  consid- 
ered under  paragraph  2  above. 

The  early  policy  of  the  State  reserved  the  minerals  in 
its  grants  of  lands.  Cowan  vs.  Hardeman,  26  Texas,  217. 
But  these  mineral  rights  were  later  released  to  the  owners 
of  patented  land.  Const.  1866,  Art.  7,  Sec.  39;  State  vs. 
Parker,  61  Texas,  265. 


124  LAW  OF  OIL  AND  NATURAL  GAS 

The  Act  of  April  4,  1883,  which  reserved  the  minerals  in 
school  land  to  the  State,  did  not  provide  for  the  sale  of 
the  minerals  separately,  but  for  mining  claims  to  be 
worked  for  a  royalty  to  the  State.  The  Act  of  March  29, 
1889,  authorized  the  sale  of  mineral  bearing  lands  with 
the  minerals,  but  not  sale  of  the  minerals  separately. 
Where  land  was  sold  as  grazing  land  in  December,  1887, 
though  the  minerals  should  be  held  not  to  have  passed  by 
the  sale,  there  was  no  law  in  1900  authorizing  another  to 
enter  a  mining  claim  upon  it  or  to  buy  the  minerals  from 
the  State  separate  from  the  land.  Heil  &  Schuster  vs. 
Martin,  96  Texas,  209,  71  S.  W.,  814. 

These  regulations  were  succeeded  by  the  present  law, 
the  Act  of  1895,  permitting  prospecting  and  the  sale  of 
the  land  with  the  minerals.  Decisions  as  to  the  right  to 
purchase  under  this,  Act  are  collected  in  the  note  to  Ar- 
ticle 5912,  Rev.  Stats.,  ante. 

5.      EMPLOYER'S    LIABILITY. 

Oil  and  gas  companies,  in  their  relations  to  their  em- 
ployes, come  under  the  provisions  of  the  Act  of  April 
16,  1913,  commonly  known  as  the  Employer's  Liability 
Law.  Laws  1913,  pp.  429-438.  By*  Section  1  of  this  Act, 
contributory  negligence  of  an  erpploye  injured  or  killed 
is  no  longer  a  full  defense  to  actions  therefor,  but  merely 
a  ground  for  abatement  in  the  amount  of  damages.  It  is 
no  longer  a  defense  that  the  injury  was  caused  by  the  neg- 
ligence of  a  fellow  servant.  Nor  is  the  defense  of  as- 
sumed risk  allowable  except  when  the  injury  was  inten- 
tionally incurred  by  the  employe. 

Companies  or  individuals  employing  more  than  five  em- 
ployes may  become  members  of  the  "Texas  Employers' 
Insurance  Association",  and  in  this  case,  by  the  payment 
of  premiums  for  insurance  of  their  employes  against  ac- 
cident, recourse  of  the  latter  for  injury,  or  of  their  heirs 
in  case  of  death  from  injury,  may  be  had  only  against  such 
insurance  fund,  the  right  thereto  being  determined  by  the 
"Industrial  Accident  Board",  or  by  action  against  such 
Board. 


LAW  OF  OIL  AND  NATURAL  GAS  125 

TAXATION. 

STATE  AND  COUNTY. 

The  recent  important  ruling  on  the  liability  of  the 
estate  conveyed  by  an  oil  lease  to  taxation  as  an  interest 
in  real  property  has  already  been  noted.  Texas  Co.  vs. 
Daugherty,  Sup.  Ct.,  May  21,  1915;  176  S.  W.,  717.  In 
that  case  the  Texas  Oil  Co.  had  been  taxed  as  owner  of 
interests  in  various  tracts  of  land  in  which  it  held  oil 
and  gas  rights  by  leases,  all  substantially  to  the  same 
effect.  These  instruments,  for  a  valuable  consideration, 
"granted,  bargained,  sold  and  conveyed  all  the  oil,  gas, 
coal,  and  other  minerals  in  and  under"  the  respective 
tracts  of  land.  They  gave  the  usual  drilling  and  mining 
rights,  conditioned  on  the  beginning  of  drilling  operations 
by  the  grantee  within  one  year,  with  the  alternative  of 
continuing  the  contract  in  force  for  three  years  by  pay- 
ment of  an  annual  rental.  On  development  of  a  paying 
well,  grantee's  rights  were  made  absolute,  subject  to  pay- 
ment of  royalties  on  the  oil  and  gas  produced,  for  the 
period  of  twenty  years,  and  so  much  longer  as  oil  or  gas 
continued  to  be  produced  in  paying  quantities.  Each  in- 
strument concluded  with  the  following  clause: 

"This  lease  is  not  intended  as  a  mere  franchise,  but 
is  intended  as  a  conveyance  of  the  property  and  privileges 
above  described,  for  the  purposes  herein  mentioned  and 
it  is  so  understood  by  all  parties  hereto." 

The  owners  of  the  fee  had  rendered  these  lands  for 
taxation  at  their  fair  market  value,  subject  to  the  rights 
conferred  on  the  lessees  by  the  contracts,  and  considering 
their  value  as  oil  bearing  lands,  present  or  prospective, 
as  limited  to  the  royalties  reserved  in  the  leases.  The 
rights  of  the  lessee  were  taxed  separately  as  interests  held 
by  it  in  the  land. 

The  oil  company  claimed  that  oil  and  gas,  owing  to 
their  fugitive  character,  were  not  capable  of  being  con- 
veyed in  situ,  the  owner  of  the  soil  having  himself  no 
absolute  title  to  them,  but  merely  a  right  to  acquire 


126  LAW  OF  OIL  AND  NATURAL  GAS 

title  by  reducing  them  to  possession  and  confining  them. 
That  until  severed  and  extracted  from  the  soil  these  sub- 
stances were  incapable  of  ownership  as  property;  and 
that  the  conveyances  passed  no  title  to  them,  but  merely 
a  privilege  of  so  acquiring  title. 

This  claim  was  not  allowed.  The  court  held  that  oil  and 
gas  were  minerals,  and  a  part  of  the  soil;  that  the  trans- 
fer of  them,  like  that  of  any  other  minerals,  was  a  con- 
veyance of  an  interest  in  the  soil;  and  that  the  estate 
acquired  by  the  grantee  was  taxable  as  an  interest  in 
land  owned  by  it.  The  authorities  on  the  subject  are 
fully  reviewed,  and  the  distinction  is  drawn  between  leases 
which  convey  an  interest  in  the  realty,  and  those  which 
confer  a  mere  privilege  of  acquiring  title  to  such  elements 
when  severed  from  the  soil. 

For  taxation  by  the  State  other  than  the  ad  valorem  tax 
on  real  and  personal  property,  see  the  statutes,  ante,  pp. 
64-67. 

UNITED  STATES  INTERNAL  REVENUE. 

By  the  Act  of  Congress  of  October  22,  1914,  revenue 
stamps  are  required  to  be  affixed  to  various  documents 
by  the  person  signing  or  issuing  them,  under  penalty  of 
a  fine  not  to  exceed  $1000  or  imprisonment  not  exceeding 
six  months,  or  both.  This  Act  is  too  recent  to  have  met 
with  any  extensive  judicial  or  departmental  construction; 
but  we  append  to  the  portions  of  it  quoted  below  a  digest 
of  rulings  under  similar  provisions  of  the  Act  of  1898, 
taken  from  a  circular  recently  issued  by  the  Acting  Com- 
missioner of  Internal  Revenue.  The  instruments  relating 
to  transactions  in  oil  and  gas  which  require  such  stamps, 
as  enumerated  in  Schedule  A  of  said  Act,  with  the  rulings 
mentioned,  are  as  follows: 

Bonds,  debentures,  or  certificates  of  indebtedness  issued 
on  and  after  the  first  day  of  December,  nineteen  hundred 
and  fourteen,  by  any  asociation,  company,  or  corporation, 
on  each  $100  of  face  value  or  fraction  thereof,  5  cents, 
and  on  each  original  issue,  whether  on  organization  or 


LAW  OF  OIL  AND  NATURAL  GAS  127 

reorganization,  of  certificates  of  stock  by  any  such  asso- 
ciation, company,  or  corporation,  on  each  $100  of  face 
value  or  fraction  thereof,  5  cents,  and  on  all  sales,  or 
agreements  to  sell,  or  memoranda  of  sales  or  deliveries  or 
transfers  of  shares  or  certificates  of  stock  in  any  asso- 
ciation, company,  or  corporation,  whether  made  upon  or 
shown  by  the  books  of  the  association,  company,  or  cor- 
poration, or  by  any  assignment  in  blank,  or  by  any  de- 
livery, or  by  any  paper  or  agreement  or  memorandum  or 
other  evidence  of  transfer  or  sale,  whether  entitling  the 
holder  in  any  manner  to  the  benefit  of  such  stock,  or  to 
secure  the  future  payment  of  money  or  for  the  future 
transfer  of  any  stock,  on  each  $100  of  face  value  or  frac- 
tion thereof,  2  cents ;  Provided,  That  it  is  not  intended  by 
this  act  to  impose  a  tax  upon  an  agreement  evidencing  a 
deposit  of  stock  certificates  as  collateral  security  for 
money  loaned  thereon,  which  stock  certificates  are  not 
actually  sold,  nor  upon  such  stock  certificates  so  deposited : 
Provided  further,  That  in  case  of  sale  where  the  evidence 
of  transfer  is  shown  only  by  the  books  of  the  company 
the  stamp  shall  be  placed  upon  such  books;  and  where  the 
change  of  ownership  is  by  transfer  certificate  the  stamp 
shall  be  placed  upon  the  certificate;  and  in  cases  of  an 
agreement  to  sell  or  where  the  transfer  is  by  deliverey 
of  the  certificate  assigned  in  blank  there  shall  be  made 
and  delivered  by  the  seller  to  the  buyer  a  bill  or  memo- 
randum of  such  sale,  to  which  the  stamp  shall  be  affixed; 
and  every  bill  or  memorandum  of  sale  or  agreement  to 
sell  before  mentioned  shall  show  the  date  thereof,  the 
name  of  the  seller,  the  amount  of  the  sale,  and  the  matter 
or  thing  to  which  it  refers. 

Certificate  of  profits,  or  any  certificate  or  memorandum 
showing  an  interest  in  the  property  or  accumulations  of 
any  association,  company,  or  corporation,  and  on  all  trans- 
fers thereof,  on  each  $100  of  face  value  or  fraction  thereof, 
2  cents. 

Certificate  of  any  description  required  by  law  not  other- 
wise specified  in  this  act,  10  cents. 


128  LAW  OF  OIL  AND  NATURAL  GAS 

Contract :  Broker's  note,  or  memorandum  of  sale  of  any 
goods  or  merchandise,  stocks,  bonds,  exchange,  notes  of 
hand,  real  estate,  or  property  of  any  kind  or  description 
issued  by  brokers  or  persons  acting  as  such,  for  each  note 
or  memorandum  of  sale,  not  otherwise  provided  for  in  this 
act,  10  cents. 

Conveyance:  Deed,  instrument,  or  writing,  whereby 
any  lands,  tenements,  or  other  realty  sold  shall  be  granted, 
assigned,  transferred,  or  otherwise  conveyed  to,  or  vested 
in,  the  purchaser  or  purchasers,  or  any  other  person  or 
persons,  by  his,  her,  or  their  direction,  when  the  consider- 
ation or  value  of  the  interest  or  property  conveyed,  ex- 
clusive of  the  value  of  any  lien  or  encumbrance  thereon, 
exceeds  $100  and  does  not  exceed  $500,  50  cents;  and  for 
each  additional  $500  or  fractional  part  thereof  in  excess 
of  $500,  50  cents :  Provided,  That  nothing  contained  in  this 
paragraph  shall  be  so  construed  as  to  impose  a  tax  upon 
any  instrument  or  writing  given  to  secure  a  debt. 

Power  of  attorney  or  proxy  for  voting  at  any  election 
for  officers  of  any  incorporated  company  or  association, 
except  religious,  charitable,  or  literary  societies,  or  public 
cemeteries,  10  cents. 

Power  of  attorney  to  sell  and  convey  real  estate,  or  to 
rent  or  lease  the  same,  to  receive  or  collect  rent,  to  sell 
or  transfer  any  stock,  bonds,  scrip,  or  for  the  collection 
of  any  dividends  or  interest  thereon,  or  to  perform  any 
and  all  other  acts  not  hereinbefore  specified,  25  cents: 
Provided,  That  no  stamps  shall  be  required  upon  any 
papers  necessary  to  be  used  for  the  collection  of  claims 
from  the  United  States  for  pensions,  back  pay,  bounty, 
or  for  property  lost  in  the  military  or  naval  service. 

(1)  When  a  bond  is  said  to  be  issued.     Whenever  a 
corporation  issues  a  bond,  and  there  accrues  to  the  cor- 
poration a  benefit  or  consideration  for  issuing  the  same, 
the  bond   is   subject  to  taxation.      (Vol.   2,   Treas.    Dec. 
(1898),  No.  20156.) 

(2)  Stamp  tax;  certificates  of  stock;  sales  and  trans- 


LAW  OF  OIL  AND  NATURAL  GAS  129 

fers  of  certificates  of  stock.     (Vol.  2,  Treas.  Dec.  (1898), 
No.  19607.) 

(3)  In  reckoning  the  stamp  tax  on  transfers  of  cer- 
tificates of  shares,  the  tax  is  reckoned  on  the  face  value. 
(Vol.  2,  Treas.  Dec.  (1898),  No.  19710.) 

(4)  Transfers  of  shares  or  certificates  of  stock;  how 
stamps  are  to  be  attached;  stamp  tax  to  be  reckoned  on 
face  value   of  certificate.      (Vol.   2,   Treas.   Dec.    (1898), 
No.  19888.) 

(5)  Transfers  of  stock  from  guardian  to  ward  sub- 
ject to  taxation.     (Vol.  2,  Treas.  Dec.  (1898),  No.  20070.) 

(6)  Preferred  stock  issued  in  lieu  of  common  stock  not 
taxable  when  there  is  no  change  of  ownership.     (Vol.  1, 
Treas.  Dec.  (1899),  No.  20694.) 

(7)  Where  brokers  acting  in  behalf  of  their  principals 
buy  stock  and  receive  stamped  bills  of  sale  in  their  own 
names,  they  may  transfer  such  stock  on  the  books  of  the 
corporation  to  the  names  of  their  principals  without  ad- 
ditional  stamp   tax.      (Vol.    1,    Treas.    Dec.    (1899),    No. 
20727.) 

(8)  Certificates  of  stock  of  a  foreign  corporation  when 
sold    or    delivered    within    the  United    States    are    liable 
to  the  same  tax  as  certificates  of  stock  of  any  domestic 
corporation.     (Vol.  1,  Treas.  Dec.   (1899),  No.  20793.) 

(9)  "Puts"   and    "calls."     The   Attorney  General   de- 
cided that  the  former  are  not  subject  to  tax,  but  that  the 
latter,  being  agreements   to   sell,   are  taxable.      (Vol.    1, 
Treas.  Dec.   (1899),  No.  21151.) 

(10)  When  a  certificate  of  stock  is  presented  for  trans- 
fer and  power  of  attorney  on  the  back  thereof  is  dated 
prior  to  July  1,  1898,  although  the  name  of  the  transferee 
is  not  filled  in  until  after  that  date,  both  the  power  of 
attorney  and  the  certificate  are  required  to  be  stamped. 
(Vol.  1,  Treas.  Dec.  (1899),  No.  21277.) 

(11)  No  tax  on  the  closing  of  a  stock  transaction  caus- 
ed by  margin  being  exhausted  because  of  market  going 
against    speculator.      (Vol.    2,    Treas.    Dec.    (1899),  No. 
21707.) 


130  LAW  OF  OIL  AND  NATURAL  GAS 

(12)  The  circumstances  under  which   the   memoranda 
issued    by  brokers    evidencing   the    sale   or    purchase    of 
stock  need  or  need  not  be  stamped.     (Vol.  2,  Treas.  Dec. 
(1899),  No.  21711.) 

SALES  OF  TRANSFERS  OF  STOCK. 

Following  rulings   are   taken   from   Circular   No.   503, 
Revised  November  14,  1898 : 

(13)  In  reckoning  the  stamp  tax  on  transfer  of  certifi- 
cate of  stock,  the  tax  is  reckoned  on  the  face  value.     In 
reckoning  this  tax,  the  fact  that  only  part  of  the  face  value 
of  shares  subscribed  for  and  issued  has  been  paid  by  the 
shareholders  is  not  to  be  taken  into  consideration. 

(14)  Where  stock  is  sold  at  the  par  value  of  $100, 
and  upon  which  it  appears  that  only  $25  have  been  paid, 
the  tax  is  to  be  reckoned  upon  the  face  value  of  $100,  and 
not  upon  the  $25. 

(15)  Where  one  certificate   represents   several   shares, 
the  tax  of  2  cents  on  each  $100  or  fraction  thereof  is  to 
be  reckoned  on  the  face  value  of  the  certificate,  and  not 
on  the  face  value  of  each  separate  share. 

(16)  On   transfer   of   one   certficate    representing   500 
shares,  $5  par  value,  the  stamp  tax  required  is  50  cents. 

(17)  When  stock  is  transferred  for  which  no  certificate 
has  been  issued,  and  the  evidence  of  transfer  is  shown 
only   by   books   of   the   company,  the    stamps   should   be 
placed  upon  such  books.    Where  the  change  of  ownership 
is   by  the  transfer   of   a   certificate,   and   the   certificate 
contains  a  blank  form  of  assignment  on  the  back,  which  is 
filled  in  by  the  insertion  of  the  name  of  the  person  to 
whom  the  stock  is  transferred,  the  stamp  should  be  placed 
upon  the  certificate. 

(18)  In  case  of  an  agreement  to   sell,   or   where   the 
transfer  is,  by  the  delivery  of  the  certificate,  signed  in 
blank,  the  name  of  the  transferee  or  vendee  to  be  filled  in 
afterwards,  there  should  be  made  and  delivered  by  the 
seller  to  the  buyer  a  bill  or  memorandum  of  sale,  to  which 
the  stamp  should  be  affixed. 


LAW  OF  OIL  AND  NATURAL  GAS  131 

(19)  Where  certificates  of  shares  were   sold   and   de- 
livered before  July  1,  1898,  entry  of  transfer  on  corporate 
books  after  June  30  does  not  require  stamp. 

(20)  New  certificates  of  stock  issued  to  holder  in  lieu 
of  original  certificate,  and  remaining  in  his  ownership,  do 
not  require  stamps. 

(21)  When  certificate  of  stock  is  sold  and  stamp  tax 
is  paid  on  memorandum  thereof,   upon  transfer  of  this 
certificate  to  purchaser's  name  no  additional  tax  for  such 
transfer  is   required.      Where    one    certificate    represents 
several   shares  of  stock    (however  large  the   number   of 
shares),  on  transfer  of  this  certificate  the  stamp  tax  is 
to  be  reckoned   on  its  face   value   and  not  on  the   face 
value  of  each  separate  share  of  stock  which  it  represents. 

(22)  Transfers  of  stock  from  parties  occupying  fidu- 
ciary relationship  to  those  for  whom  they  held  the  stock 
are  transfers  subject  to  taxation. 

(23)  A  owns  a  certificate  of  100  shares  of  stock;  he 
transfers  50  shares  to  B;  there  are  two  certificates  of  50 
shares  each  issued  in  lieu  of  the  100-share  certificate,  50' 
shares  going  to  A  and  50  shares  to  B.     The  tax  imposed 
is  on  the  transfer  to  B;  there  is  no  tax  on  A's  transfer 
to  himself. 

(155)  An  instrument  authorizing  the  secretary  to  trans- 
fer stock  on  the  books  of  the  company  held  not  to  be  tax- 
able as  a  power  of  attorney.     (Vol.  2,  Treas.  Dec.  (1899), 
No.  21467.) 

(156)  An   instrument   appointing  an   attorney  in   fact 
to  transfer  stock  on  the  books  of  the  company  requires  to 
be  stamped  as  a  power  of  attorney,  but  an  instrument 
authorizing  the  secretary  to  make  the  transfer   is  held 
not  to  be  a  power  of  attorney.     (Vol.  2,  Treas.  Dec.  (1899), 
No.  21563.) 

Among  the  conveyances  above  mentioned  and  requiring 
stamps,  may  be  included  many  of  the  current  forms  of 
leases  conveying  mineral  rights  in  oil  and  gas,  and  trans- 
fers of  such  leases.  It  is  only  instruments  transferring  an 
interest  in  realty  which  are  required  by  the  Act  to  be 


132  LAW  OF  OIL  AND  NATURAL  GAS 

so  stamped.  But,  as  already  seen,  those  which  convey 
title  to  the  minerals  are  of  this  character,  though  the 
mineral  is  still  in  the  soil,  and  not  mined  or  reduced  to 
possession.  Leases  which  grant  a  mere  privilege  of 
prospecting  and  mining,  conveying  no  interest  in  the  min- 
eral until  reduced  to  possession,  would  transfer  to  the 
lessee  no  interest  in  the  realty,  and  would  not  come  under 
the  Act. 

The  question  of  what  constitutes  an  interest  in  the  land 
itself  being  one  of  Texas  law,  the  Federal  courts  and 
authorities  would,  it  may  be  assumed,  follow  the  rulings 
of  the  Supreme  Court  of  Texas  on  that  subject,  as  an- 
nounced in  Texas  Co.  vs.  Daugherty,  supra.  See  Guffey 
vs.  Smith,  237  U.  S.,  101,  advance  sheets. 

The  Act  of  1914  also  imposes  a  license  tax  upon  brokers. 
This,  followed  by  some  judicial  and  departmental  rulings 
upon  the  similar  enactments  of  1898,  is  as  follows: 

Second.  Brokers  shall  pay  $30.  Every  person,  firm, 
or  company  whose  business  it  is  to  negotiate  purchases 
or  sales  of  stocks,  bonds,  exchange,  bullion,  coined  money, 
bank  notes,  promissory  notes,  or  other  securities,  for 
themselves  or  others,  shall  be  regarded  as  a  broker: 
Provided,  That  any  person  having  paid  the  special  tax 
as  a  banker  shall  not  be  required  to  pay  the  special  tax 
as  a  broker. 

(21)  The  loaning  of  money  for  oneself  or  for  others 
on  commission  does  not  subject  the  lender  to  special  tax 
as  a  broker;  but  if  a  person  makes  it  a  business  to  negot- 
iate purchases  or  sales  of  stocks,  bonds,  exchange,  bullion, 
coined  money,  bank  notes,  promissory  notes,  or  other  se- 
curities, for  himself  or  others,  he  is  required  to  pay  the 
tax.     "It  is  only  when  making  sales  and  purchases  is  his 
business,  his  trade,  his  profession,  his  means  of  getting 
his  living,  or  making  his  fortune  that  he  becomes  a  broker 
within  the  meaning  of  the  statute."     (Warren  vs.  Shook, 
91  U.  S.,  704.) 

(22)  Persons  or  firms  acting  as  agents  for  parties  loan- 


LAW  OF  OIL  AND  NATURAL  GAS  133 

ing  money  upon  promissory  notes  secured  by  mortgages 
are  not  brokers. 

(23)  A  lawyer  can  make  investments  for  clients  with- 
out being  liable,  unless  he  does  it  to  such  an  extent  that 
it  can  be  called  a  "business." 

(24)  Loan    and    mortgage    companies    not    liable    for 
loaning  money  on  notes  or  bonds  secured  by  mortgage 
or  trust  deed  on  real  estate.    If  they  purchase  notes,  bonds, 
or  other  securities  they  bec6me  liable  as  brokers. 

(25)  A  person  engaged  in  the  business  of  placing  loans 
secured  by  notes  and  mortgages  upon  real  estate,  acting 
simply  as  agent,  receiving  a  commission  for  his  services 
in  obtaining  the  application  for  the  loan  and  attending 
to  the  execution  of  the  papers,  is  not  a  broker. 

(26)  A  person  engaged  in  the  business  of  selling  real 
estate,  acting  as  the  agent  of  the  owner  in  finding  pur- 
chasers and  receiving  a  commission  for  his  services,  is 
not  a  broker. 

(27)  When   persons   negotiate   purchases   or   sales   of 
promissory  notes,  if  these  are  only  occasional  acts  and 
do   not  constitute   their   regular   business,   they   are   not 
brokers  within  the  meaning  of  the  act. 

(28)  Bucket-shop   proprietors   giving   memorandum   of 
transactions  are  required  to  pay  special  tax  as  brokers. 

(29)  The  principal's  special-tax  stamp  for  his  place  of 
business  in  another  city  covers  the  transactions  only  at 
that  place  of  business  and  can  not  cover  the  business 
done  elsewhere  at  a  branch  office. 

(30)  Broker's  tax  is  not  required  to  be  paid  at  branch 
offices  where  a  clerk  is  employed  whose  sole  duty  is  to 
receive  orders  and  transmit  them  by  wire  to  the  head 
of   the  office.      The    mere    receipt    and    transmission    by 
clerks  of  orders  is  not  regarded  as  carrying  on  the  bus- 
iness of  a  broker,     (Vol.  2,  Treas.  Dec.,  No.  19843.) 

(31)  Special  tax  must  be  paid  for  every  branch  office 
where   the    employee    in    charge    not    only    receives    and 
transmits  orders  with  the  money  to  the  main  office,  but 
also  receives  from  the  main  office  moneys  for  disburse- 


134  LAW  OF  OIL  AND  NATURAL  GAS 

ment  to  customers,  or  keeps  accounts  with  the  customers 
at  the  branch  office,  or  does  other  business  with  re- 
lation to  the  transactions  of  brokers  at  such  branch  office. 
Separate  special  tax  must  be  paid  and  a  separate  stamp 
taken  out  for  every  "bucket  shop,"  whether  such  office  is 
called  a  branch  office  or  a  main  office.  (Vol.  2,  Treas. 
Dec.  (1898),  No.  20374.) 

(32)  It  is  the  language  of  the  statute,  and  not  the 
ordinary  and  usual  meaning  of  the  word  "broker,"  which 
must  govern  in  determining  who  is  a  broker  required  to 
pay   a   special   tax.      (Vol.    1,   Treas.    Dec.    (1899),    No. 
20549.) 

(33)  While  a  mining  syndicate  or  other  association  is- 
suing certificates  of  stock  in  a  company  organized  by  it 
is  not  required  to  pay  a  special  tax  as  a  broker  therefor, 
a  manager  or  other  person  employed  by  it  to  sell  such 
certificates  on  commission  is  a  broker  and   required   to 
pay  special  tax.     (Vol.  1,  Treas.  Dec.  (1899),  No.  20637.) 

(34)  An  express  or  railway  agent  doing  business  for 
his  principals  only,  not  a  broker.      (Vol.   1,  Treas.  Dec. 
(1898),  No.  20106.) 

Persons  engaging  in  only  occasional  dealings  in  oil 
property  or  stock  of  companies  may  not  always  be  able  to 
decide  whether  their  transactions  bring  them  within  the 
definition  of  a  broker  under  this  Act.  No  precise  defini- 
tion can  be  safely  given.  The  test  appears  to  be  whether 
such  dealings  by  them  are  sufficient  to  constitute  engaging 
in  a  business.  We  are  permitted  to  add  the  following 
copy  of  a  circular  letter  used  by  the  United  States  Col- 
lector at  Austin,  Hon.  A.  S.  Walker,  in  answer  to  fre- 
quent inquiries  addressed  to  him  upon  this  question: 

"In  reply  to  your  telephone  inquiry  to  this  office  today, 
you  are  advised  that  the  Act  of  Oct.  22,  1914,  imposes 
a  broker's  tax  of  $30.00  per  annum  on  every  person,  firm 
or  company  whose  business  it  is  to  negotiate  purchases 
or  sales  of  stock,  promissory  notes  or  other  securities  for 
themselves  or  others.  Under  this  statute  your  company 


LAW  OF  OIL  AND  NATURAL  GAS  135 

would  have  the  right  to  sell  its  own  stock  without  in- 
curring liability,  or  any  individual  would  have  the  same 
right,  and  either  your  company  or  an  individual  would 
have  the  right  to  employ  an  agent  for  that  purpose,  under 
an  exclusive  contract  calling  for  compensation  by  salary 
or  by  commission,  and  under  those  conditions  the  agent 
would  not  incur  liability  unless  he  were  at  the  same  time 
engaged  in  the  business  of  negotiating  purchases  or  sales 
of  stock  as  provided  in  the  law.  The  right  referred 
to  of  employing  agents  will  not  authorize  an  evasion  of 
the  law,  it  being  necessary  that  such  employment  should 
be  in  good  faith.  The  payment  of  the  broker's  tax  for 
an  office  at  one  place  would  permit  the  transaction  of 
business  at  other  places  through  the  usual  channels,  by 
mail  or  otherwise,  but  if  it  were  intended  that  more  than 
one  office  should  be  maintained,  each  office  would  be 
liable  to  a  separate  tax.  To  incur  liability  under  this 
statute,  it  is  not  necessary  that  a  man  shall  devote  his 
exclusive  attention  to  the  brokerage  business.  He  may 
be  liable,  and  still  have  another  occupation  for  means  of 
livelihood,  but  it  is  necessary  that  he  shall  make  it  a 
substantial  part  of  his  business.  One  isolated  trans- 
action would  not  create  liability." 


136  LAW  OF  OIL  AND  NATURAL  GAS 

FORMS. 

FORM  I. 
CHARTER  OF  A  DOMESTIC  CORPORATION. 

STATE  OF  TEXAS, 
County  of 


Know  all  men  by  these  presents :     That  we, 

and ,   all   citizens   of 

county,  Texas,  under  and  by  virtue  of  the  laws  of 

this  State,  do  hereby  voluntarily  associate  ourselves  together  for  the 
purpose  of  forming'  a  private  corporation  under  the  terms  and  condi- 
tions hereinafter  set  out,  as  follows : 

1.  The  name  of  this  corporation  is 

2.  The  purpose  for  which   it  is  formed    (here   quote  the  statutory 
purpose). 

3.  The  place  where  the  business  of  the  corporation  is  to  be  trans- 
acted is  at County,  Texas. 

4.  The  term  for  which  it  is  to  exist  is years. 

5.  The  number  of  directors  shall  be and  their  names 

and  postoffice  addresses  are  as  follows: 


6.  The  amount  of  capital  stock  is  $ divided  into 

shares  of  $ each,  all  of  which  capital  stock  has  been  sub- 
scribed, and  50  per  cent  paid  in,  as  per  affidavit,  attached  hereto. 

In  testimony  whereof  we  hereunto  sign  our  names  this day 

of....  .,  191.... 


STATE  OF  TEXAS, 
County    of 


Before  me,  the  undersigned  authority,  on  this  day  personally  ap- 
peared  ,  

and ,  known  to  me  to  be  the  persons 

whose  names  are  subscribed  to  the  foregoing  instrument,  and  severally 
acknowledged  to  me  that  he  executed  the  same  for  the  purpose  and 
consideration  therein  expressed. 

In  testimony  whereof  I  hereunto  subscribe  my  name  and  affix  the 


LAW  OF  OIL  AND  NATURAL  GAS  137 

seal  of  my  office,  this day  of ,  A.  D.  191 

[SEAL.]  (Name)     

(Office)     


NOTE. — This  concise  and  comprehensive  form  was  suggested  by  Hon. 
F.  C.  Weinert,  when  Secretary  of  State,  in  his  pamphlet  containing 
the  principlal  corporation  laws  of  the  State,  from  which  we  take  the 
liberty  of  borrowing  it.  We  would,  however,  add  the  suggestion  that 
it  is  not  always  advisable,  nor  would  it  in  all  cases  be  quite  sufficient, 
to  confine  the  statement  of  the  purpose  for  which  the  corporation  is 
formed  to  the  language  of  the  statute  itself. 


FORAI   II. 

PURPOSE   CLAUSE   FOR   CHARTER   OF   AN    OIL   COMPANY. 

The  purpose  of  this  corporation  is,  the  establishment  and  mainte- 
nance of  an  oil  company,  with  authority  as  follows :  to  purchase  and 
hold  land  in  the  operation  of  its  business  containing  deposits  of  coal, 
others  minerals,  petroleum,  and  gas  or  the  title  to  such  minerals  apart 
from  the  fee  in  the  land  ;  to  mine,  develop  and  use  such  minerals,  by 
borings,  wells,  or  other  mining  operations  appropriate  to  their  pro- 
duction at  the  surface,  and  to  sell  and  market  the  same ;  to  contract 
for  the  lease  and  purchase  of  the  right  to  prospect  for,  develop,  and 
use  coal  and  other  minerals,  petroleum  and  gas ;  to  erect,  build, 
and  own  all  oil  tanks,  cars,  and  pipes  necessary  for  the  operation 
of  the  business  aforesaid,  and  to  acquire  and  own  the  land  necessary 
therefor;  and,  generally,  to  exercise  all  powers  with  reference  to  the 
acquisition,  mining,  use,  and  sale  of  such  minerals  which  are  ex- 
pressly or  by  implication  conferred  by  the  laws  of  the  State  of  Texas 
upon  a  corporation  created  under  Articles  1120,  1121,  of  the  Revised 
Statutes  of  Texas,  for  the  purposes  specified  in  Paragraph  16,  of  said 
Article  1121. 

NOTE. — The  charters  of  oil  companies  in  this  State  have  usually  fol- 
lowed, literally,  in  the  purpose  clause,  the  language  of  paragraph  16, 
Article  1121.  It  seems  probable,  but  not  quite  certain,  that  such 
purpose  clause  would  confer  all  the  powers  above  enumerated.  But 
a  charter  may  by  its  terms  give  more  restricted  powers  than  the  laws 
permit  to  be  conferred  on  the  corporation  and  this  form  is  suggested 
as  one  which  would  remove  some  possible  doubt  as  to  the  power  of 
the  corporation  to  do  all  which  it  is  authorized  by  the  law  to  acquire 
a  right  to  do. 


138  LAW  OF  OIL  AND  NATURAL  GAS 


FORM   III. 

PURPOSE  CLAUSE  IN  CHARTER  OF  CORPORATION   FOR  PRODUCING,  TRANSPORTING 

AND  SELLING  GAS. 

The  purpose  of  this  corporation  is  to  produce,  make  and  manufacture 
gas  by  natural  or  artificial  means  and  to  transport  and  sell  the  same 
to  individuals,  the  public  and  municipalities  for  light,  heat,  power 
and  other  purposes  and  to  make  reasonable  charges  therefor,  to  con- 
struct, maintain  and  operate  power  plants,  substations  and  such 
machinery,  apparatus,  pipes,  devices  and  arrangements  as  may  be 
necessary  to  operate  such  lines  at  and  between  different  points  in 
this  State  and  to  conduct  the  business  of  this  corporation  at  and 
between  different  points  in  this  State ;  and  generally  to  do  any  and 
all  things  and  to  exercise  any  and  all  powers  as  a  gas  company  set 
forth  in  Chapter  III  of  the  General  Laws  passed  by  the  Regular 
Session  of  the  Thirty-second  Legislature. 

NOTE. — This  form  for  the  purpose  clause  of  a  natural  gas  company  is 
the  one  suggested  by  the  Attorney  General  in  his  opinion  holding  that 
such  corporations  were  authorized  by  the  Act  therein  mentioned. 
See  Report  of  Attorney  General  for  1912-  1914,  p.  287. 

FORM  IV. 

AFFIDAVIT   TO   ACCOMPANY   ORIGINAL   CHARTER,   OR   AMENDMENT   TO    CHARTER 
INCREASING    CAPITAL    STOCK. 

STATE  OF  TEXAS, 
County  of 


Before  me,  the  undersigned  authority,  on  this  day  personally  ap- 
peared  known  to  me,  who,  having  been  by  me 

first  duly  sworn,  on  oath  say  each  for  himself : 

That  they  are  the  identical  parties  who  executed  the  charter  of 

company  as  incorporators  (or  that  they  comprise  the  present 

board  of  directors  of  the company),  that  the  full 

amount  of  the  (increased)  capital  stock  of  said  company  has  been 

in  good  faith  subscribed  and  $ thereof  paid  in;  that  the 

following  are  the  namtes  and  postoffice  address  of  the  parties  sub- 
scribing to  the  capital  (or  increased  capital)  stock: 

Name.  Postoffice  Address. 


LAW  OF  OIL  AND  NATURAL  GAS  139 

That  the  amount  subscribed  by  each  and  the  amount  paid  by  each  is 
as  follows : 

Name.  Amount  Subscribed.  Amount  Paid. 


That  the  above  subscriptions  were  paid  as  follows  :* 


Subscribed  and  sworn  before  me  this day  of A.  D.  191 

Notary  Public County,  Texas. 

*Here  should  be  added  the  manner  of  payment,  whether  in  cash, 
property  or  labor,  describing  the  property  or  labor,  as  provided  in 
Art.  1126,  R.  S. 

Proof  of  final  payment  must  be  made  in  same  manner  as  proof  of 
payment  of  original  capital  stock. 

NOTE. — This  affidavit  should  accompany  the  charter,  to  supply  the 
information  requiied  to  be  furnished  to  him  by  Articles  1125-1128, 
Revised  Statutes.  The  form  is  that  suggested  by  Secretary  of  State 
Weinert  in  his  pamphlet  on  the  corporation  laws. 

LEASES   AND   CONTRACTS. 

The  reported  decisions  give  in  full  a  number  of  leases  and  contracts, 
the  construction  and  effect  of  \vhich  have  been  considered  by  the 
courts,  and  \vhich  may  be  used  as  forms  for  these  agreements  in  the 
light  of  such  rulings.  Among  these  the  following  may  be  consulted : 

O'Neil  vs.  Sun  Co.,  123  S.  W.,  172,  in  which  performance  by  the 
lessee  of  the  conditions  prescribed  was  held  to  give  him  a  right  to  oil 
taken  from  the  leased  tract,  though  produced  by  a  well  sunk  by  the 
lessor.  Writ  of  error  was  refused  by  the  Supreme  Court. 

Emery  vs.  League;  31  Texas  Civ.  App.,  474,  72  S.  W.,  603.  A  lease 
by  a  tenant  in  common,  which  was  held  forfeited  by  the  failure  of 
the  lessee  to  procure  partition  as  agreed.  Writ  of  error  refused. 

McAfee  vs.  Grubb,  164  S.  W.,  925,  gives  the  form  of  a  lease  under 
which  the  lessee  was  held  to  have  acquired  a  right  to  the  oil  for  the 
full  term  of  his  lease,  twenty  years,  by  his  compliance  with  the  con- 
tract, though  subsequently  he  ceased  operations.  But  in  this  case 
writ  of  error  has  been  granted,  and  it  is  now  pending  in  the  Supreme 
Court. 

The  contract  considered  in  Witherspoon  vs.  Staly,  156  S.  W.,  557, 
and  there  held  forfeited  by  the  lessee's  failure  to  perform,  will  be 
found  in  full  in  the  report  of  the  case  on  a  former  appeal,  138  S.  W., 
1191.  In  the  second  appeal  writ  of  error  was  refused  by  the  Supreme 
Court. 

The  contract  passed  on  by  the  Supremte   Court  in  National  Oil  & 


140  LAW  OF  OIL  AND  NATURAL  GAS 

Pipe  Line  Co.  vs.  Teel,  95  Texas,  591,  68  S.  W.,  979,  is  given  in  full 
in  the  opinion  of  the  Court  of  Civil  Appeals,  67  S.  W.,  545. 

From  these  and  from  other  cases  which  give  only  the  material  pro- 
visions of  the  contracts  or  the  parts  involved  in  the  decisions,  forms 
may  be  found  which  cover  nearly  all  the  provisions  commonly  con- 
tained in  instruments  of  this  character.  It  has  been  thought  proper, 
however,  to  insert  some  specimens  of  the  formfe  of  oil  and  gas  leases 
in  common  use,  for  the  convenience  of  those  not  having  time  or  oppor- 
tunity to  consult  them  in  the  reported  decisions. 

FORM  V. 

THE  STATE  OF  TEXAS, 
County    of 

Know  all  men  by  these  presents :  That 

of County,  Texas,  the  Part of  the  First 

Part,  in  consideration  of  the  sum  of paid  by 

Part of  the  Second  Part,  the  receipt  of  which  is  hereby  acknowl- 
edged, and  the  further  consideration  hereinafter  mentioned, 

Have  granted,  bargained,  sold  and  conveyed,  and  do  by  these  pres- 
ents grant,  bargain,  sell,  and  convey  unto  the  said  part of  the 

Second  Part, heirs  and  assigns,  all  of  the  oil,  gas  and 

coal  and  other  minerals  in  and  under  the  following  described  land, 
together  with  the  right  of  ingress  and  egress  at  all  times  for  the  pur- 
pose of  drilling,  mining  and  operating  for  mineral  and  to  conduct 
all  operations  and  to  lay  all  pipe  necessary  for  the  production,  mining 
and  transportation  of  the  oil,  gas,  water,  coal  or  other  minerals,  with 
the  right  to  use  sufficient  water,  gas  or  oil  to  operate  said  property, 
and  shall  have  the  right  to  remove  all  machinery,  fixtures  and  im- 
provements placed  thereon  at  any  time,  reserving,  however,  to  the 

part of  the  First  Part  the  equal  one of  all  oil  produced  and 

saved  upon  said  premises  to  be  delivered  in  the  pipe  line  to  the  credit 
of  the  part of  the  First  Part  free  of  charge. 

If  coal  is  found,  the  Part of  the  Second  Part  agree  to  pay  to 

the  First  Party  4  cents  per  ton  for  every  ton  of  the  same  that  is 
mined  and  marketed,  payable  quarterly;  if  gas  or  other  minerals  are 

found,  Second  Party  agrees  to  pay  the  First  Party for  the 

product  each  year,  payable  quarterly,  for  the  product  of  each  well, 

while  the  same  is  being  used  off  the  premises ;  and  Part of  the 

First  Part,  by  furnishing own  pipe  and  connections,  shall 

have  sufficient  gas  free  of  cost  for  use  in  one  dwelling  house  on  the 
premises,  so  long  as  the  gas  is  utilized  off  the  premises,  but  at  his 
own  risk. 

Whenever  First  Party  shall  request  it,  Second  Party  shall  bury  all 
oil  and  gas  lines,  and  pay  all  damage  done  to  the  growing  crops  by 
reason  of  burying  and  removing  the  same. 


141 

No  well  shall  be  drilled  within feet  of  any  building  now  on  said 

premises  without  the  consent  of  the  First  Party. 
Said  land  being  of  the  following  description,  to-wit : 


Containing  Acres,  more  or  less ; 

To  HAVE  AND  TO  HOLD  THE  ABOVE  DESCRIBED  PREMISES  unto  the  said 
part of  the  Second  Part,  their  heirs  and  assigns,  on  the  fol- 
lowing conditions :  In  case  operations  for  either  the  drilling  of  a 
well  for  oil  or  gas  mining  or  other  minerals  is  not  commenced  and 

prosecuted  with  due  diligence  within from  this  date,  then  this 

grant  shall  immediately  become  null  and  void  as  to  both  parties ; 
provided,  that  Second  Party  may  prevent  such  forfeiture  from  year 

to  year  by  paying  to  the  First  Party  the  sum  of  $ per 

until  such  well  is  commenced,  or  until  shipments  from  such  mines  have 
begun,  and  it  is  agreed  that  the  completion  of  a  well  shall  operate 
as  a  full  liquidation  of  all  rental  under  this  provision  during  the 
remainder  of  the  term  of  this  lease,  which  payments  can  be  made 

at Bank  of or  payable  direct  to 

part of  the  first  part. 

In  case  the  part of  the  Second  Part  should  bore  and  discover 

either  oil  or  other  minerals,  then  in  that  event  this  grant,  encum- 
brance and  conveyance  shall  be  in  full  force  and  effect  for  twenty- 
five  years  fromi  the  time  of  the  discovery  of  said  product,  and  as 
much  longer  as  oil,  gas  or  other  minerals  can  be  produced  in  paying 
quantities  thereon.  Whenever  sales  are  being  made  of  the  product 
produced  on  the  land  above  described,  a  settlement  thereof  shall  be 
made  at  the  end  of  each  quarter. 

This  grant  is  not  intended  as  a  mere  franchise,  but  is  intended  as 
a  conveyance  of  the  property  above  described  for  the  purpose  herein 
mentioned,  and  it  is  so  understood  by  both  parties  to  this  agreement. 

The  part of  the  Second  part  may  at  any  time  execute  an  instru- 
ment admitting  and  declaring  this  contract  cancelled  and  upon  de- 
livery of  the  same  to  the  part of  the  first  part  or  upon  the  filing 

of  the  same  for  record,  this  contract  and  all  liabilities  and  payments 
under  it,  from  and  after  such  time  shall  cease  and  determine. 


It  is  understood  between  the  parties  to  this  agreement  that  all 

conditions  between  the  parties  hereunto  shall  extend  to  their  heirs, 
executors,  administrators  and  assigns. 

WITNESS  our  hands,  this  the day  of 191.... 


(To  Be  Acknowledged  sarnie  as  Deeds.) 


142  LAW  OF  OIL  AND  NATURAL  GAS 

FOBM   VI 

THE  STATE  OF  TEXAS, 
County   of 

Know  all  men  by  these  present :     That  I 

of  the  County  of and  State  of  Texas,  have  and  by  these 

presents  do  hereby  demise,  let  and  lease  unto  the 

hereinafter  styled  the succes- 
sors and  assigns,  the  tract  of  land  herein  described,  for  the  purpose 
of  exploiting  the  same  for,  and  the  production  of  minerals  therefrom ; 
and  also  grant  and  convey  all  of  the  oil,  gas  and  other  minerals 
in  and  under  said  land,  as  also  the  exclusive  right  of  drilling  and 
operating  thereon  for  oil  or  gas,  together  with  a  right  of  way  for  and 
a  right  to  lay  pipe  lines  to  convey  water,  oils,  steam  and  gas,  and  the 
right  to  have  sufficient  water,  oil  and  gas  from  the  premises  to  drill 
and  operate  any  wells  that  may  be  bored,  and  also  such  other  priv- 
ileges as  are  reasonably  requisite  for  the  conduct  of  said  operations, 
»uid  the  right  to  remove,  at  any  time,  from  said  premises,  any  and  all 

property  which  may  have  been  placed  thereon  by  said 

The  said  premises  as  to  which  this  instrument  does  apply  are  situat- 
ed in County,  State  of  Texas,  and  described  as  follows : 


TO  HAVE  AND  TO  HOLD  unto  the  said successors 

and  assigns  for  the  term  and  under  the  provision,  as  follows,  to-wit : 

1.  There    is   hereby   expressly   guaranteed    to    said 

the  right  at  any  time  before  the  expiration  of  twelve  months  from 
this  date  to  begin  operations  of  drilling  a  well  for  oil  on  said  prem- 
ises, and  also  the  right  to  extensions  of  time  in  which  to  begin  such  op- 
erations, for  successive  periods  of  six  (6)  months,  on  conditions  that  the 

said  shall,  on  or  before  the  first  day  of  each 

respective  six  months  pay  to or  deposit  to 

credit  in  the Bank  of the  sum  of 

($ )    Dollars;   provided,  that  if   such  pay- 
ment shall   not   be   made   on   or   before   first   day   of   each   such   res- 
pective six  months  period,  then  and  on  such  default,  this  lease  shall 
wholly  determine ;  and  provided,  further,  that  these  successive  periods 
in  which  the  right  may  be  acquired  to  begin  the  operation  of  drilling 
a  well  in  search  of  oil  or  gas,  shall  not  exceed  in  the  aggregate  five 
(5)   years  from  this  date,  and  if  such  operations  shall  not  be  begun 
on  or  before  the  expiration  of  said  five  (5)  years  from  this  date,  then 
this  lease  shall  wholly  determine. 

2.  If  said shall   avail of  the  right   herein 

guaranteed  and  begin  operations  of  drilling  of  a  well  on  said  prem- 
ises,   then    from    and   after   the    beginning   of    such    operations,    said 


LAW  OF  OIL  AND  NATURAL  GAS  143 

shall  not  be  required  to  make  any  further  money 

payments  hereunder;  provided,  however,  if  said 

shall  begin  such  operations  of  drilling  a  well  but  shall  fail  to  prosecute 
such  operations  with  reasonable  dilligence,  then  this  lease  shall  be- 
com|e  of  no  effect. 

If shall  begin  such  operations  of  drilling  a 

well  either  within  the  fixed  twelve  months  period  from  this  date  or 
within  any  extension  period  for  which  it  may  have  paid  as  above 

provided,   then  said shall   have  the   right  to  make 

as  many  attempts  to  find  oil  or  gas please....,  and  to  continue 

the  exercise  of  such  right  as  long  as please....,  even  be- 
yond said  term  of  five  years  from  this  date ;  provided  only,  such  at- 
tempts shall  be  successive  in  the  sense  that  until  oil  or  gas  be  found 
not  more  than  sixty  days  shall  elapse  between  the  cessation  or  aban- 
donment of  work  on  one  well  and  the  beginning  of  work  on  another. 

3.  If,  in  the  exercise  of  the  right  hereby  conferred,  oil  or  gas  be 

found  in  paying  quantities  on  said  land,  then  the  said 

shall  deliver  as  royalty  to  said free  of  expense 

( )   part  of  all  the  oil  saved  from  that  pro- 
duced, such  delivery  to  be  made  either  in  tanks  with  connection  by 
lessor  provided,  or  into  any  pipe  line  that  may  be  connected  with  the 
well ;  and  if  any  well  on  said  premises  produces  gas  in  paying  quan- 
tities,  and   such   gas   is   used   o'r  marketed   off  the   premises   by   said 

,  then  the  said shall  be  paid  at 

the  rate   of   One  Hundred    ($100.00)    Dollars   per  year   for  each  and 
every  such  well,  such  payments  to  be  made  at  the  end  of  each  such  year 

4.  If,  as  a  result  of  any  explorations  under  this  contract,  any  other 

minerals  than  oil  or  gas  shall  be  found  in  quantities  deemed  by 

to  be  paying,  then shall  have  the  right  to  mine 

for  and  produce  same,  paying  to  the  lessor  what,  under  all  circum- 
stances, may  be  reasonable  royalty. 

5.  It   is   expressly  declared   that  if   oil,   gas   or   other  minerals,   or 

any  of  them,  be  found  in  paying  quantities,  then  the  said 

shall  become  at  once  vested  with  an  estate  in  and  to  all  the  min- 
erals underlying  said  land,  with  right  to  produce  the  same,  and  any 
and  all  of  same,  as  long  as  any  one  of  said  minerals  shall  be  pro- 
duced in  paying  quantities. 

6.  It  is  agreed  that  without  the  written  consent  of  both  parties 

hereto,  no  well  shall  be  drilled  within ( ) 

feet  of  the  present  buildings  on  said  premises,  and  that  the  use  of 
the  surface  of  the   land   is   hereby   granted   only   so  far  as   may  be 
necessary  to  conduct  mining  operations,  including  the  saving,  storing 
and   transporting  the   minerals. 

7.  It  is  further  provided  that  if  oil  or  gas  or  other  minerals  in  pay- 
ing quantities  shall  be  found,  and  the —  -  successors  or 
assigns   hereunder,   should   conclude  that do  not  desire   to 


144  LAW  OF  OIL  AND  NATUBAL  GAS 

operate  under  this  lease,  then  the  right  is  conferred  to  surrender  the 
same  upon  payment  of  One  Hundred  ($100.00)  Dollars  to  the  lessor, 
and  such  right  of  surrender  shall  also  confer  the  privilege  of  re- 
moving from  said  premises  any  and  all  material  placed  thereon  by 
said ,  successors  and  assigns. 

8.  It  is  further  agreed  that  all  the  conditions  and  terms  herein 
shall  extend  to  the  heirs,  executors,  legal  representatives,  successors 
and  assigns,  of  the  parties  hereto. 

The  said has  this  day  paid  to  the  said 

the  sum  of ($ )  Dollars,  the  receipt  whereof  is 

hereby  acknowledged,  and  which  payment  is  received  in  full  satis- 
faction of  any  and  every  right  hereby  granted,  including  the  right 
to  extend  the  privilege  of  exploration  of  said  land. 

Witness  the  signatures  of  the  parties  hereto  this  the day 

of....  .  A,  D.   191.... 


Lessor. 

Lessee. 
By 

Agent. 
(To  Be  Acknowledged  same  as  Deeds.) 


FORM   VII 

Know  all  men  by  these  presents :     That 

of  the  Postoffice  of ,  State  of ,   hereinafter 

called  lessor  (whether  one  or  more),  for  and  in  consideration  of 
dollars,  cash  in  hand  paid,  receipt  of  which  is  here- 
by acknowledged,  do hereby  lease  unto hereinafter 

called  lessee,  the  following  described  land,  situated  in  the  County  of 
State  of  Texas: 


for  the  purpose  of  prospecting  for  oil,  gas  and  sulphur,  and  the  pro- 
duction of  the  same  therefrom,  together  with  the  exclusive  right  of 
ingress  and  egress  at  any  and  all  times  to  prospect,  drill,  mine  and 
otherwise  operate  hereunder,  and  the  right  to  erect,  maintain  and 
remove  all  necessary  or  proper  structures  and  appliances,  including 
the  right  to  pull  the  piping  from  wells,  and  to  install,  maintain 
and  remove  all  tanks  and  other  means  of  storage  and  all  pipes  and 
other  means  of  transportation ;  and,  subject  to  the  royalties  here- 


LAW  OF  OIL  AND  NATURAL  GAS  145 

inafter  mentioned,  there  is  hereby  granted  and  conveyed  to  said  lessee 
all  of  the  oil,  gas  and  sulphur  in  and  under  said  land. 

The  royalties  above  mentioned  shall  be  (a)  on  oil,  a  quantity  equal 
to  one-eighth  of  all  produced  and  saved,  the  same  to  be  delivered  at 
the  wells  or  to  the  credit  of  the  lessor  in  the  pipe  line  to  which  the 
wells  may  be  connected ;  (b)  on  natural  gas,  at  the  rate  of  two  hun- 
dred dollars  per  annum,  payable  quarterly,  for  each  well  producing 
gas  exclusively,  and  from  which  gas  is  then  being  used  or  sold  off  the 
premises,  it  being  understood  that  the  lessor  shall  have  the  privilege, 
at  the  lessor's  own  risk  and  expense,  of  making  connections  and  using 
gas  from  such  wells  free  of  charge  for  one  dwelling  on  said  land;  (c) 
on  gas  produced  from  oil  wells,  when  such  gas  is  used  or  sold  off 
the  premises  at  the  rate  of  ten  dollars  per  annum  for  each  well 
while  the  gas  is  being  used  or  sold,  and  when  such  gas  is  used  for 
the  manufacture  of  gasoline  there  shall  be  an  additional  payment  at 
the  rate  of  ten  dollars  per  annum  for  each  \vell  while  gas  is  being 
so  used  for  the  manufacture  of  gasoline;  and  (d)  on  sulphur,  at  the 
rate  of  one  dollar  per  ton  for  all  mined  and  marketed  from  said  land. 
But  it  is  understood  and  agreed  that  the  lessee  shall  have  the  free  use 
of  oil,  gas,  wood  and  water  from  said  land  for  all  purposes  of  de- 
velopment and  operation. 

If  operations  for  the  drilling  of  an  oil  or  gas  well  are  not  begun 

on  said  land  on  or  before  the  first  day  of ,  191.... 

this  lease  shall  terminate  as  to  both  parties,  unless  the  lessee  on  or 
before  that  date  shall  pay  or  tender  to  the  lessor,  or  to  the  credit 

of  the  lessor  in  the Bank  at , 

(which  shall  continue  as  the  depository  regardless  of  changes  in  own- 
ership of  the  land,)  the  sum  of dollars,  which 

payment  or  tender  may  be  made  by  the  check  or  draft  of  the  lessee, 
and,  however  made,  shall  operate  to  confer  on  the  lessee"  the  privil- 
ege of  deferring  the  time  limit  for  six  months  from  said  date.  There- 
after, in  like  manner  and  upon  like  payments  or  tenders  of  said 
amount,  the  time  limit  may  be  further  deferred  for  additional  periods 
of  six  months  successively,  provided  always  that  this  lease  can  not 
be  kept  in  force  by  such  payments  in  the  absence  of  drilling  opera- 
tions for  a  longer  period  than  five  years  from  the  date  last  above  set 
forth.  But  nothing  in  this  paragraph  contained  shall  obligate  the 
lessee,  against  its  wish  or  option,  to  make  any  such  payment  or  to  drill 
or  otherwise  carry  on  operations  hereunder.  And  it  is  understood  and 
expressly  agreed  that  the  consideration  first  recited  in  this  lease, 
the  down  cash  payment,  and  the  obligation  of  the  grantee  contained 
in  the  next  ensuing  paragraph  thereof,  shall  be  held  to  support  and 
sustain,  not  only  the  privileges  granted .  to  the  date  first  written  in 
this  paragraph,  namely,  the  date  when  this  lease  is  to  terminate 
unless  an  additional  payment  or  tender  is  made,  but  also  the  lessee's 
option  of  extending  that  period  from  time  to  time  and  keeping  this 


146  LAW  OF  OIL  AND  NATURAL  GAS 

lease  in  force  as  aforesaid,  as  well  as  any  and  all  other  rights  and 
privileges  conferred  on  the  lessee  by  this  instrument. 

If  during  the  period  of  this  lease  or  the  extensions  of  the  time 
limit  for  drilling,  and  within  five  years  from  the  date  above  set 
forth,  and  prior  to  the  discovery  of  oil  or  gas  on  said  leased  land, 
there  shall  be  drilled  on  adjacent  land  and  within  200  feet  of  any  line 
of  said  leased  land,  a  well  producing  as  much  as  50  barrels  of  oil  per 
day  for  thirty  consecutive  days,  the  lessee  will,  with  reasonable  dili- 
gence, begin  and  prosecute  the  drilling  of  a  well  on  said  leased  land 
in  a  faithful  effort  to  find  and  produce  oil  in  paying  quantities. 

After  operations  for  the  drilling  of  an  oil  or  gas  well  shall  have 
been  begun  on  said  leased  land  it  shall  not  be  necessary  for  the  les- 
see to  make  any  further  payments  in  lieu  of  drilling  operations  as 
provided  in  the  second  preceding  paragraph  hereof  in  order  to  keep 
this  lease  in  force ;  and  during  said  period  of  five  years  drilling  opera- 
tions may  be  suspended  from  time  to  time,  without  terminating  this 
lease,  provided  the  lessee  shall  have  paid  or  tendered,  or  shall  then 
pay  or  tender,  the  amount  hereinbefore  mentioned  for  the  then  cur- 
rent period  of  six  months,  including  the  time  of  such  suspension, 
and  provided  further  that  after  such  operations  are  so  begun  no  such 
payment  or  tender  shall  be  necessary  when  the  operations  are  being 
carried  on  in  good  faith  and  the  period  of  suspension  is  less  than 
thirty  days. 

If  the  lessee  shall  sink  a  well  or  shaft  and  discover  oil,  gas  or  sul- 
phur in  paying  quantities  in  or  under  the  above  described  land,  then 
this  lease  shall  remain  in  full  force  and  effect  for  ten  years  from 
such  discovery,  and  as  much  longer  as  oil,  gas  or  sulphur  shall  be 
produced  therefrom  in  paying  quantities ;  and,  having  so  discovered  oil. 
gas  or  sulphur  in  paying  quantities,  the  lessee  shall  be  exempt  from 
loss  or  forfeiture  of  this  lease,  in  whole  or  in  part,  except  after  ju- 
dicial ascertainment  that  the  lessee  has  failed  to  perform  its  duty  and 
discharge  its  obligations  hereunder  and  a  reasonable  opportunity 
thereafter  to  prevent  such  loss  or  forfeiture,  and  in  event  of  final 
loss  or  forfeiture  there  shall  be  reserved  to  the  lessee  each  producing 
well  or  mine  with  10  acres  of  land  surrounding  the  same  to  be  des- 
ignated by  the  lessee. 

No  well  shall  be  drilled  nearer  than  two  hundred  feet  to  any 
house  or  barn  now  on  said  land,  unless  by  consent  of  the  lessor,  and 
nothing  herein  contained  shall  deprive  the  lessor  of  the  full  use  and 
enjoyment  of  said  land,  subject  to  the  privileges  and  estate  hereby 
granted,  and  when  requested  by  the  lessor  the  lessee  shall  bury  its  pipe 
lines  so  that  they  will  not  interefere  with  cultivation. 

If  the  interest  owned  by  the  lessor  in  said  land  is  or  shall  prove 
to  be  less  than  the  entire  fee  the  royalties  and  moneys  herein  pro- 
vided for  shall  be  delivered  or  paid  to  the  lessor  in  the  proportion 
only  that  the  interest  of  the  lessor  bears  to  the  entire  fee. 


LAW  OF  OIL  AND  NATURAL  GAS  147 

If  the  estate  of  either  party  hereto  is  assigned — and  the  privilege 
of  assigning  in  whole  or  in  part  is  expressly  allowed — the  covenants 
hereof  shall  extend  to  the  assigns  and  successive  assigns,  but  no 
change  in  ownership  of  the  land  or  the  rentals  or  royalties,  by  pur- 
chase or  otherwise,  shall  be  binding  on  the  lessee  until  it  shall  have 
been  furnished  with  notice  and  proper  evidence  of  such  change. 

IN  TESTIMONY  WHEEEOF  this  instrument  is  signed  this  the 

day  of 19 

Witnesses : 


(To  Be  Acknowledged  same  as  Deeds.) 

FORM  VIII. 

STATE  OF  TEXAS, 
County  of 


Know  all  men  by  these  presents :     That  this  memorandum  of  agree- 
ment this  day  made  and  entered  into  by  and  between 


of County,  Texas,  parties  of  the  first  part  and 

of County,   Texas, 

parties  of  the  second  part, 
Witnesseth : 

That  whereas,  the  parties  of  the  first  part  own  certain  land  situated 

in County,  Texas,  which  is  supposed  to  be  underlaid 

with  oil  and  gas,  which  they  desire  developed,  and  a  part  of  which 
the  party  of  the  second  part  is  desirous  of  developing  for  oil.  It 
is  therefore  mutually  agreed  between  the  parties  hereto : 

1.  That  the  parties  of  the  first  part  for  the  consideration  here- 
inafter mentioned  will  allow  the  party  of  the  second  part  to  enter 
upon  and  take  possession  of  the  following  described  portion  of  said 
land  for  the  purpose  of  developing  the  same  for  oil,  to-wit : 


2.  That  the  party  of  the  second  part  hereby  agrees  for  the  con- 
sideration hereinafter   stated,   to   enter  upon  and   undertake  the   de- 
velopment  of  said   land   for  oil,   and   within days   from  the   date 

hereof  to  commence  one  well  thereon,  and  to  furnish  all  machinery 

and  material,  and  at own  expense,  bore  or  sink  the  said  well 

to  the  depth  of feet  or  more,  unless  oil  is  found  in 

paying  quantities  at  lesser  depth,  and  in  constructing  said  well  to  use 
ordinary  care,   skill  and  diligence,  and  to  complete  the  same  in  any 
event  within months  from  this  date. 

3.  That  if  oil  is  developed  in  paying  quantities  in  the  said  well, 


148  LAW  OF  OIL  AND  NATURAL  GAS 

then  the  party  of  the  second  part  agrees  to  begin  within days 

from  the  completion  of  said  well,  the  boring  of  another  well  on  said 

land  and  to  furnish  all  material  and  machinery  at own 

expense  and  to  prosecute  the  work  of  sinking  said  second  well  with 
ordinary  care,  skill  and  diligence,  and  sink  the  same  to  the  depth 

of  at  least feet,  or  more,  unless  oil  in  paying  quantities  is  developed 

at  lesser  depth;  and  if  oil  is  developed  in  said  second  well  then  the 

party  of  the  second  part  is  to  bore  at own  expense  a  third 

well  upon  said  land  and  to  continue  at own  expense  within 

a  reasonable  time  boring  other  wells  on  said  land  so  long  as  oil  is 
found  in  paying  quantities  and  to  such  number  as  is  necessary  for 
the  reasonable  development  of  the  entire  said  tract  of  land,  due  regard 
being  had  to  the  interests  of  all  parties  hereto  and  the  development 
of  other  land  in  the  vicinity  of  said  tract  being  considered. 

4.  That  if   oil   is  not  discovered   in   paying  quantities   in   the   first 
well  the  party  of  the  second  part  shall  have  the  right  to  discontinue 
boring  on  said  land  and  shall  at  once  surrender  to  the  parties  of  the 
first   part  the   possession  thereof ;   but  if   oil   in   paying  quantities   is 
developed  in  the  first  well  but  not  in  the  second  well,  then  the  party 
of   the   second   part  shall   have  the   right,   upon   surrendering  to   the 
parties  of  the  first  part,  possession  of  all  of  the  said  tract  of  land 
except acres  surrounding  the  said  first  well,  to  stop  drill- 
ing on  said  land,  in  which  event  all  rights  of  the  party  of  the  second 
part  under  this  agreement  shall  cease,  except  the  right  to  operate  the 
said  first  well  until  it  is  exhausted. 

5.  That  if  oil  is  developed  the  party  of  the  second  part  shall  use 
due  diligence  in  producing  the  same  and  shall  furnish  all  material, 
labor,   machinery   and   fixtures   necessary   to   the   development  of   said 
land  and  the  storing  and  preserving  of  all  oil  produced  therefrom  and 
in  consideration  thereof  and  of  the  development  of  said  land  shall  re- 
tain and  own of  all  oil  produced  and  saved  from  the  said 

premises  from  developed  wells  which  have  to  be  pumped  or  operated 

with    compressed    air,    and of  all    oil    produced    from 

wells  which  gush;  and  in  consideration  of  this  lease  the  parties  of 
the  first  part  shall  own  the  remaining part  of  all  oil  pro- 
duced and  saved  from  said  land  which  shall  be  delivered  by  the  party 
of  the   second   part  free   of   cost  to   the   parties   of  the   first  part,   in 
tanks  furnished  by  the  party  of  the  second  part,  or  in  pipe  lines  des- 
ignated   by   the    parties    of   the    first    part,   all    necessary   connections 
with  the  tanks  and  pipe  lines  to  be  made  by  and  at  the  expense  of  the 
party  of  the  second  part. 

6.  That  the   party  of  the   second    part   reserves   the   right   on  the 
termination  of  this  lease  to  remove  from  the  premises  all  improve- 
ments and  machinery  placed  thereon  by and  shall  have 

that  right  provided  it  is  exercised  and  same  removed  within 


LAW  OF  OIL  AND  NATURAL  GAS  149 

days  after  the  termination  of  this  lease,  but  if  not  so  removed  the 
same  shall  become  the  property  of  the  parties  of  the  first  part. 

7.  The  party  of  the  second  part  shall  keep  correct  books  of  account 
showing1  the  production  of  each  and  every  well  as  well  as  the  share  or 
proportion  due  to  the  parties  of  the  first  part,  which  books  shall  bfe 
kept  open  for  the  inspection  of  all  parties  interested  in  this  agree- 
ment, at  all  reasonable  times. 

8.  The  parties  of  the  first  part  shall  have  the  right  to  have  at  any 
and  all  times  a  representative  upon  the  ground  who  shall  have  ac- 
cess to  the  tanks,  wherever  oil  is  stored,  with  the  right  to  measure 
the   same,   and  shall  be  afforded  all  reasonable  facilities  for  investi- 
gating the  amount  of  oil  produced  from  said  land  and  the  condition  of 
the  wells  and  generally  overlook  the  interests  of  the  parties  of  the 
first  part  with  relation  to  this  lease. 

9.  The  only  consideration  for  this  contract  of  lease  being  the  pros- 
pective royalty  above  provided  for,  the  vesting  of  any  right  herein- 
under  in  the  party  of  the  second  part  or  the  continuance  thereof,  if 
once  vested,  shall  be  conditioned  upon  the  faithful  performance  by  the 
party  of  the  second  part  of  all  and  every  of  the  covenants,  obligations 

and  agreements  hereinabove  recited  to  be  performed  by 

and  a  failure  upon  the  part  of  the  party  of  the  second  part  to  per- 
form any  one  or  more  of  such  covenants,  obligations  or  agreements 
at  any  time  for  a  period  of  thirty  days  shall  at  the  option  of  the  par- 
ties of  the  first  part  operate  to  forfeit  all  rights  held  by 

under  this  instrument  and  upon  notice  of  such  forfeiture  being  given 

to  the  party  of  the  second  part  by  the  parties  of  the  first  part 

shall  thereby  cease  to  have  any  right  in  said  premises  and  shall  sur- 
render the  same  to  the  parties  of  the  first  part  free  of  all  claim,  and 
the  parties  of  the  first  part  shall  have  the  right  to  re-enter  and  retake 
possession  of  said  premises  and  eject  the  party  of  the   second  part 
therefrom  and  shall  not  be  liable  for  any  damages  done  on  account 
thereof. 

Witness  our  hands  this day  of ,  191 

(Signed  in  duplicate,  each  party  retaining  a  copy.) 


INDEX. 

References  are  to  pages. 

ABANDONMENT.  PAGE. 

Of  operation  of  wells 67-68 

ACTIONS. 

To  determine  corporate   existence 18-19 

Capacity  to  sue  and  be  sued 20-21 

By  creditor  of  corporation 23-24 

Decrease  of  capital  stock 27-28 

By   foreign    corporation . . , 49-50 

For  penalties  on  act  regulating  wells 71 

On  refusal  of  permit  to  sell  stock 76 

On  bond  given  for  stock  sales 76-77 

To  reinstate  permit  to  sell  stock 78 

ACCOMMODATION  PAPER. 

Corporation  cannot  sign 20 

AFFIDAVITS. 

Of  payment  of  capital  stock 15-16 

Of  subsequent  payment  of  \inpaid  capital  stock 22 

Of  subscription  and  payment  of  increased  stock 24 

Of  financial  condition  of  corporation 27-28 

To  reports  required  of  corporation 35 

As  condition  for  permit  to  foreign  corporation 47-48 

Officers   authorized  to   make 52 

To  determine  amount  of  franchise  tax 65-66 

To  accompany  original  charter 138-139 

AGENTS. 

Power  of  corporation  to  appoint 19 

Power  to  appoint  general  manager 21 

Disclaiming  act  by  corporation 31 

Sale  of  stock  by 78-79 

ALIENATION. 

Of  lands  company  is  not  authorized  to  hold 33-48 

AMENDMENT. 

Of  charter  by  corporation 17-18 

Of  charter  by  legislature 19 

Of  by-laws  by  corporation 28 

ATTORNEY'S  FEES. 

As  promotion  expenses  of  corporation 72-101 


152  INDEX 

ATTORNEY  GENERAL.  PAGE. 

To  bring  suit  for  penalties 51 

Opinion  construing-  Blue  Sky  Law 81-108 

BAYS  AND  TIDAL  WATERS. 

Mineral  rights  in 112,113 

BLUE  SKY  LAW. 

Effect  on  sale  of  stock 25,  26, 108 

Statute  regulating  sales  of  stock 72-81 

Opinion  of  Attorney  General  construing  same 81-108 

BONDS. 

Extending  credit  of  corporation.     Note 20 

For  what  purposes  issued 26 

Action  for  unlawful  issuance 26-27 

Eeport  of  bonded  indebtedness 34 

For  compliance  with  Blue  Sky  Law 76 

Action  upon  such  bond 77 

BOOKS. 

To  be  kept  by  corporation 29,  77,  78 

BROKERS. 

Internal  revenue  license  tax  on 132-135 

BY-LAWS. 

Power  of  corporation  to  make 19 

Note  on  same 21 

Making  and  amendment  of 28 

CARS. 

Power  of  pipe  line  to  own 44 

CASINO. 

Of  oil  and  gas  wells 67 

CHARTERS. 

Must  be  by  general  law 7 

What  charter  must  contain 13-14 

To  be  subscribed  and  acknowledged 14 

Incorporation  of  business  firm 15 

Affidavit  to  accompany. 16 

Amendment  of   17-18 

Amendment  by   legislature 19 

Fee  for  filing 52 

Form  for  charter  of  corporation •.  136 

CITIES. 

Power  of  gas  company  to  contract  with 40-41 


INDEX  153 

> 

CITIZENSHIP.  PAGE. 

Of  subscribers  to  charter , 14 

COMMISSIONS. 

On  sale  of  stock.     Note 25,  26, 108 

Regulation  by  Blue  Sky  Law 72-81 

Construction  of  Act  by  Attorney  General 81-108 

CONDEMNATION. 

Power  to  exercise  eminent  domain.     Note 13 

For  purposes  of  pipe  line • 42 

CONDITIONS. 

In  contracts  and  leases  of  oil  and  gas  rights 114-122 

CONSOLIDATION. 

Of  two  or  more  corporations 18 

CONSTITUTION. 

Creation   of   private   corporation 7 

CONSIDERATION. 

Of  option  or  unilateral  contract 120-121 

CONTRACTS. 

Power  of  corporation  to  make 

Implied  authority.     Note 

Becoming  surety  for  another.     Note 

To  act  as  trustee.    Note 

To  acquire  and  hold  land.     Note 

Power  to  purchase  land 

Leases  and  contracts  for  mining  rights 114-122 

CONTRIBUTION. 

To  stock-holder  paying  debt  of  corporation 40 

CONVEYANCES. 

Of  land  by  corporation.     Note 21 

How  made  by  corporation 32 

CORPORATIONS. 

Constitutional  provisions    7 

Classification  of   8 

Creation  of    8-19 

Powers  and  duties  of 19-33 

Acquisition  of  land  by 33 

Reports  required  of 34-36 

Liability  of  stockholders  and  directors 36-37 

Dissolution   of    37-40 

Gas  and  water  companies 40-41 

Pipe  line  companies 41-44 

Companies  to  produce  ana  sell  gas 45-46 

Foreign  corporations   46-50 


154  INDEX 

PAGE. 

Reports  to  determine  franchise  tax 50-52 

Fees  required  to  be  paid 52-53 

Regulations  of  sales  of  stock 72-108 

COURTS. 

Jurisdiction  in  enforcement  of  regulation  of  wells 70-71 

CREDITORS. 

Rights  on  decrease  of  capital  stock 27-28 

Liability  of  stockholders  to 39-40 

DEBTS. 

Decrease  of  stock  as  affecting 27-28 

Restrictions   upon   creation 30 

Reports  in  regard  to 34 

DEEDS. 

By  corporation 21-32 

Separating  title  to  minerals  from,  that  of  the  soil 113-114 

DEPOSIT. 

Of  money  received  from  sale  of  stock 77 

DIRECTORS. 

Named  in  charter 13 

Increase  or  decrease  of  number.  .1 20,  28 

Power  to  increase  capital  stock 24 

Power  to  decrease  stock 27-28 

Quorum  and  annual  elections 28 

Effect  of  failure  to  elect 28-29 

Have  general  management  of  corporate  affairs     29 

Records  and  books  to  be  kept  by • 29,  77,  78 

Reports  and  dividends  to  stockholders 29 

Declaring  dividend  when  insolvent 37 

Repudiating  political  contribution 31 

Liability  for  debts  of  corporation 37-39 

Act  as  trustees  on  dissolution 39 

DISCRIMINATION. 

Transportation  of  gas  by  pipe  line 13-43 

DISSOLUTION. 

Winding  up  affairs  of  corporation 23 

How   corporation   dissolved .' 37-38 

Appointment  of  receiver  on  dissolution 38-39 

Officers  and  directors  as  trustees -  38-39 

Liability  of  stockholders  to  creditors 39-40 

Contribution  between  stockholders 40 

Limit  of  stockholders'  liability. 40 


INDEX  155 

DIVIDENDS.  PAGE. 

Declaring  when  company  is  insolvent 37 

DOCKS. 

Power  of  pipe  line  company  to  own 43-44 

EASEMENTS. 

Mineral  rights  in  streets  and  highways , 111-112 

EMINENT  DOMAIN. 

Eight  of  pipe  line  company  to  condemn 42 

Eight  of  gas  company  to  condemn 45-46 

Title  to  minerals  in  street  or  right  of  way 111-112 

EMPLOYEE'S  LIABILITY. 

Eegulated    by    statute 124 

ESTOPPEL. 

To  deny  croporate  power.  Note 22 

EXISTENCE  OF  CORPORATION. 

Dates  from  time  of  filing  charter 16-17 

Not  collaterally  disputed 18 

FEDERAL  LAWS. 

Not  applicable  to  Texas  public  lands 123 

Internal  revenue   126-135 

FEES  OF  OFFICE. 

Payment  of  charter  fee  and  franchise  tax 15 

On  reinstatement  of  forfeited  charter 23 

Charter  fee   52-53 

Plan  for  sale  of  corporate  stock 73 

FILING. 

Corporate  charter 15-16 

Corporation  exists  from  time  of  filing  charter 16-17 

Amendments  to   charter 17 

Plan  for  sale  of  corporate  stock. . , > 73 

FOREIGN  CORPORATIONS. 

Obtaining  permit  to  do  business 46-50 

Fee  on  obtaining  permit 52-53 

Sale  of  stock  by 98-100 

FORFEITURES. 

For  failure  to  pay  up  capital  stock 22-23 

For  watering   stock 25 

For  failing  to  commence  operations 38 

Of  mining  claims 61 


156  INDEX 

FORMS.  PAGE. 

Charter  of  domestic  corporation 136 

Purpose  clause  of  charter  of  oil  company 137 

Purpose  clause  for  gas  company 138 

Affidavit  to  accompany  charter  or  amendment 138-139 

Leases  and  contracts  for  mineral  rights 139-149 

FRANCHISE  TAX. 

Corporations  created  for  more  than  one  purpose 12-13 

Payment  on  filing  charter 15 

Reports  to  determine  amount ,. . . .  51-52 

Fee  for  filing  charter 52 

For  permit  of  foreign  corporation 52-53 

Annual  tax  on  corporations 64-67 

GAS. 

Obtaining  rights  in  public  lands 58-62 

Regulation  of  wells ' 67-71 

Is  a  mineral  and  part  of  the  soil 109 

Modification  of  title  by  fluid  nature 110 

Ownership  by  title  to  soil 109-113 

Separated  from  title  to  soil  by  conveyance 113-114 

Mining  contracts  and  leases 114-124 

GAS  COMPANIES. 

Incorporation  of    9-13 

Privileges  of  such   corporations 40-41 

Companies  for  transporting,  storing  and  selling 41-44 

Corporations  for  generating,  transporting  and  selling 44-46 

Regulation  of  sale  of  stock 72-108 

GUARANTY. 

Power  of  corporation  to  become  surety.    Note 20-21-22 

HOMESTEAD. 

Wife  to  join  in  couveyance  of  mineral  rights 113 

INCREASE. 

Of   capital   stock 24-27 

INSOLVENCY. 

Declaring  dividends  when  insolvent. 37 

Dissolution  of  corporation  on 38 

INTERNAL  REVENUE. 

Federal  laws  imposing 126-135 

JOINT  OWNERS. 

Mineral  rights   of Ill 


INDEX  157 

LAND.  PAGE 

Corporate  seal  required  in  conveyance 21-33 

Eight  to  purchase  and  hold 48-49 

Mining  claims  on  public  domain 54-64 

LEASES. 

Authority  of  oil  company  to  lease 9-10 

Eights  of  tenants  for  years • HI 

Of  mining  rights  on  another's  land 114-119 

Forms  of  mining  leases ,. .  139-149 

« 
MINERALS. 

Oil  and  natural  gas 109 

Title  of  owner  of  soil 109-110 

Fluid  and  liquid  minerals 110 

Joint  or  common  owners ,.  Hi 

Eights  of  tenants  for  years Ill 

Eights  in  streets,  ways  and  easements 111-112 

Underlying  rivers  and  bays 112-113 

Title  separated  from  that  of  the  soil 113-114 

Contracts  and  leases  for  mining 114-116 

Implied  obligation  to  develop 117-118 

Title  acquired  by  performance 118-119 

Options  and  unilateral  contracts 120-122 

Contracts  for  operation 122-123 

Acquiring  rights  in  public  lands 123-124 

Taxation  of  mineral  right  in  land 125-126 

MARRIED  WOMAN. 

As  stockholders  or  officers  of  corporations. . . . ; 14 

Conveyance  of  mineral  rights  in  homestead.    Note 113 

MINES  AND  MINING. 

Acquiring  mining  rights  in  public  land 54-64 

Eegulation  of  oil  and  gas  wells 67-73 

MINING  DISTRICT. 

In  public  lands 54 

MORTGAGES. 

Power  of  corporation  to  mortgage 19 

Eeports  of  mortgages  on  property 34 

Mortgages  of  franchises  and  property  for  borrowed  money  43 

By  foreign  corporation 48 

Eeports  to  determine  franchise  tax 51 

NAME. 

Of  corporation  in  charter 13 

Succession  by  corporate  name 19 

Suit  by  corporate  name.    Note 20-21 

Misnomer  not  to  vitiate  grant. .- 32 


158  INDEX 

NATURAL  GAS.  PACK. 

Obtaining-  rights  in  public  land 58-62 

Regulation  of  wells 67-71 

Is  a  mineral  and  part  of  the  soil 109 

Modification  of  title  by  fluid  nature 110 

Belongs  to  owner  of  soil 109-113 

Separated  from  title  to  soil  by  conveyance 113-114 

Mining  contracts  and  leases 114-124 

OFFICE. 

Principal  office  must  be  kept  in  state 32 

Office  outside  of  the  state 44 

OFFICERS. 

Power  to  appoint  and  remove 19 

Power  to  appoint  general  manager 21 

Quorum  of  directors  and  annual  elections 28 

Political  contribution  of  corporate  funds 30 

As  trustees  of  dissolved  corporation 38-39 

Doing  business  under  old  corporate  name 40 

Names  of  officers  to  be  reported 51 

Authorized  to  make  report 52 

Superintendent  of  oil  or  gas  field 70 

Names  to  be  reported  before  sale  of  stock 73 

OIL. 

Acquiring  mining  rights  in  public  lands 58-62 

Regulation  of  wells 67-71 

Is  a  mineral  and  part  of  the  soil 109 

Title  of  owner  of  soil  to 109 

Modification  of  title  by  liquid  nature 110 

Rights  of  joint  or  common  owner Ill 

Rights  of  tenant  for  years Ill 

Rights  in  streets,  ways  and  easements 111-112 

Underlying  rivers  and  tidal  waters 112-113 

Separation  of  title  from,  soil 113-114 

Conditional  contracts  and  leases 114-116 

Conditions  implied  from  lease 117-118 

Compliance  with  conditions  by  grantee 118-119 

Options  and  xinilateral  contracts 120-122 

Contract   for   operating   wells 122-123 

Taxation  of  oil  rights  apart  from  land 125-126 

OIL  COMPANIES. 

Purposes  for  which  they  may  be  created 9-13 

Form  of  charter 13-14 

Companies  for  storing,  transporting  and  selling 41-44 

Regulation  of  wells  by  statute 67-71 

Sale  of  stock  by 72-108 


INDEX  159 

OPTIONS.  PAGE. 

Validity  of  optional  contract '. 120-122 

OWNERSHIP. 

Of  minerals  while  in  the  soil 109-110 

PATENT. 

To  public  mineral  lands .  .< 60 

Passes  title  to  minerals 109 

PAYMENT. 

For  capital  stock  subscribed 15 

Proof  of  such  payment 15-16 

Form  of  affidavit  to  show  payment 138-139 

Of  increased  capital  stock 24 

How  stock  subscription  paid 25-26 

Of  funds  for  political  purposes 30 

PEBMIT. 

To  foreign  corporation  to  do  business 46-50 

To  sell  stock  in  corporation 72-108 

PENALTIES. 

Forfeiture  of  charter 30-31 

For  failure  to  make  report 36-51 

For  failure  to  comply  with  regulations  of  wells 69-71 

PERFORMANCE. 

Of  conditions  in  grant  of  mineral  rights 118-119 

PETROLEUM. 
See  Oil. 

PIPE  LINES. 

Discrimination  by  prohibited 43 

For  storing,  transporting,  buying  and  selling 41-44 

Of  company  for  generating  and  selling  gas 45-46 

PLACE  OF  BUSINESS. 

To  be  named  in  charter 13 

Corporation  prohibited  from  making 30-31 

POWERS  OF  CORPORATION. 

General  powers    19-22 

To  increase   capital   stock 24 

To  adopt  by-laws 28 

To  increase  number  of  directors 28 

Of   directors   of   corporation 29 

To   borrow   money ; • 29-43 

To  execute  bonds  and  notes 29 

To  pledge  property  and  income  for  borrowed  money 29 


160  INDEX 

PAGE. 

To  sue  its  own  members 32 

To  convey  land 32 

To  purchase  and  hold  land 33 

To  dissolve  corporation 37-38 

Of  gas  and  water  companies 40-41 

Of  oil,  gas  and  salt  companies 41 

Condemnation  of  lands  by  such  companies 42 

To  borrow,  issue  stock,  and  mortgage 43-46 

To  operate  outside  the  state 43-44 

To  mine,  transport  and  sell  gas 45 

To  condemn  easement  for  pipe  line 45-46 

Of  foreign  corporation  under  permit 48-49 

PBOMOTEB. 

Payment  of  promotion  expenses 25-26 

Regulation  of  promotion  expenses 72-108 

PROMOTION  EXPENSES. 

How  paid    i 25-26 

Regulation  of  by  statute 72-108 

PUBLIC  DOMAIN. 

Disposition  of  mineral  lands 54-64, 123, 124 

PUBLIC  INTEREST. 

Regulations  against  wasting  supply  of  oil  and  gas.    Note . .  7 

PURPOSE. 

For  which  oil  and  gas  companies  may  be  formed 9-13 

To  be  stated  in  the  charter 13 

Forms  of  purpose  clauses 137-138 

RECEIVERS. 

To  close  out  corporation  business 38-39 

REPORTS. 

By  gas  company  to  state 34-36 

To  determine  annual  franchise  tax • 50-52,  66 

REVIVAL. 

Of  forfeited  charter 23 

RIGHT  OF  WAY. 

Minerals  underlying  railway 111-112 

RIVERS  AND  BAYS. 

Minerals   underlying    112-113 

RIPARIAN  PROPRIETARIES. 

Mineral  rights  of 112-113 


INDEX  161 

SALES.  PAGE. 

Of  public  mineral  lands 58-62 

Of  stock  in  oil  or  gas  companies 72-108 

Of  mineral  rights  in  land 113-122 

SEAL. 

Right  of  corporation  to  use • 19 

Required  in  corporate  conveyance  of  land 21,  32 

SECRETARY  OF  STATE. 

Duties  with  reference  to  filing  charters.  .< 15-16 

With  reference  to  payment  of  capital  stock 22-24 

Reports  by  corporations  to 34-35 

Permit  to  foreign  corporation 47-48 

Fees  collected  by 52-53 

Franchise  tax  collected  by 64-68 

Permits  to  sell  stock  by 72-81 

SHIPS. 

Right  of  pipe  line  company  to  own 44 

STAMPS. 

Required  by  internal  revenue  law 126-132 

STOCK  AND  STOCKHOLDEBS. 

For  what  stock  may  issue 7 

Amount  designated  in  charter 13 

Married  woman  as  stockholder  and  incorporator 14 

Amount  to  be  subscribed  and  paid 15 

Showing  how  stock  is  paid  for 16 

Increase  in  number  of  directors , 20 

Unpaid   stock    22-23 

Increase  in  capital  stock i 24-27 

Watering  stock    25-26 

For  what  stock  can  be  issued.     Note 25-26 

Decrease  in   capital  stock . . : 27-28 

Reports  by  directors  to  stockholders 29 

Neglect  to  pay  installment 31-32 

Reports  as  to  stock  issued 34 

Liability  of  stockholders 36-37 

Dissolution  by  consent  of  stockholders 38 

Liability  of  stockholders  on  dissolution 39 

Contribution  between  stockholders 40 

Liability  on  unpaid  stock , 40 

Reports  as  to  stock  authorized  and  issued 51 

Franchise  tax  based  on  capital  stock 64-67 

Regulation  of  sale  of  stock 72-108 

For  what  issued  and  how  paid 105-108 


162  INDEX 

STREET  AND  HIGHWAYS.  PAGE. 

Rights  to  minerals  underlying 111-112 

SUPERINTENDENT. 

Of  oil  and  gas  fields 70 

SURETY. 

Power  of  corporation  to  become.     Note «. . . .        20-22 

TANKS. 

Pipe  line  company  may  maintain 41 

TAXATION. 

Payment  of  franchise  tax 12 

Fee  on  filing  charter .t 15,  52 

Reports  to  determine  amount 51-52 

Por  permit  of  foreign  corporation 52-53 

Annual  tax  on  corporations 64-67 

Ad  valorem  tax  on  mineral  rights 125-126 

United  States  internal  revenue 126-135 

TENANTS. 

Have  no  interest  in  minerals Ill 

TERM. 

For  which  corporation  is  to  exist 13 

Where  period  is  not  designated  by  charter 19 

Of  permit  to  foreign  corporation 49 

TRUSTEES. 

Corporate  officers  trustees  on  dissolution 38-39 

UNILATERAL  CONTRACT. 

Validity  of    120-122 

UNITED  STATES. 

Mineral  laws  of 123 

Internal  revenue   126-135 

WASTE. 

Opening  mines  on  land Ill 

WATERED  STOCK. 

Prohibition   against    25-27 

WATERS. 

Salt  water  appearing  in  wells 69-70 

Rights  of  riparian  owners 112-113 

WELLS. 

Regulation  of  oil  and  gas  wells % 67-71 

Contracts  for  operation 122-123 


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